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■!  Bulletin  "C" 


INCOME  TAX 


Comparison  of  Titles  and  Sections  of  the  Revenue  Acts  ^{  1917 
and  1916  applicable  to  Income  and  Profits  Taxes 


California 

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WASHINGTON 
GOVERNMENT  PRINTING  OFHCB 

1920 


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Treasury  Department    :    :    Bureau  of  Internal  Revenue 

Bulletin  "C" 

INCOME  TAX 


Comparison  of  Tides  and  Sections  of  the  Revenue  Acts  of  1917 
and  1918  applicable  to  Income  and  Profits  Taxes 


WASHINGTON 

GOVERNMENT  PUNTING  OFHCB 

1920 


PREFACE. 

This  comparison  of  the  Kevenue  Acts  of  1917  and  1918  is  made  on 
the  following  general  plan: 

(a)  Only  those   titles  and  sections  applicable   to  income   and 

profits  taxes  are  compared. 
(6)  The  comparison  is  made  in  the  order  in  which  the  various 
sections  appear  in  the  Revenue  Act  of  1918. 

(c)  Difference  in  treatment  of  similar  subjects  in  the  two  acts, 

features  of  either  act  not  contained  in  the  other,  and  en- 
tirely new  features  in  the  1918  act  are  emphasized. 

(d)  In  all  cases,  regardless  of  how  the  subject  is  treated,  corre- 

sponding sections  of  the  two  acts  are  placed  opposite  each 
other.  If  the  subject  is  treated  similarly  in  both  acts, 
notation  to  that  effect  is  made. 

(e)  Although  it  is  intended  to  emphasize  differences,  in  some 

instances  where  a  subject  is  entirely  new  in  the  1918  act, 
mere  notation  to  that  effect  is  made,  since  reference  can 
readily  be  made  to  the  act  itself  for  particulars. 

(/)  Reference  is  made  in  some  instances  either  to  Regulations 
No.  33  revised  or  Regulations  No.  45  where  a  subject  may 
be  specifically  covered  in  one  act  but  mentioned  only  in 
the  regulations  governing  the  other  act. 

(g)  The  term  "Act  of  1916  as  amended"  means  the  Revenue 
Act  of  September  8,  1916,  as  amended  by  the  Revenue  Act 
of  October  3,  1917.  "Act  of  1917"  means  the  Revenue 
Act  of  October  3,  1917.  Both  acts  were  in  effect  for  the 
year  1917. 

(3) 


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OOMPARTSON  OF  TITLES  AND  SECTIONS  OF  THE  RETENUE 

ACTS  OF  1917  AND  1918  APPLICABLE  TO  INCOME 

AND  PROFITS  TAXES. 


1917. 


The  1917  act  contains  no  section  cover- 
ing general  definitions.  Sec.  200  of  Title 
II,  War  Excess  Profits  Tax,  defines  "cor- 
poration," "domestic,"  "foreign," 
^'United  States,"  and  "taxable  year." 
The  meaning  of  the  terms  is  the  same  as 
when  used  in  the  1918  Act. 


Tke  word  "State"  or  "United  States,]' 
■when  used  in  Title  I,  includes  any  Terri- 
tory, the  District  of  Columbia,  Porto 
Ricoijj  and  the  Philippine  Islands,  when 
such  construction  is  necessary  to  carry 
out  the  provisions  of  the  title.  (Sec.  15, 
Act  of  1916  as  amended.) 


Sec.  200: 

The  "first  taxable  year"  means  the 
calendar  year  1917,  or  in  the  case  of  part- 
nerships and  corporations  which  have 
established  fiscal  years  any  fiscal  year 
ended  in  1917.  Individuals  were  not 
allowed  to  file  fiscal-year  returns  under 
this  act.  Although  this  definition  is 
given  under  the  "War  Excess  Profits" 
title,  it  has  the  same  meaning  in  appljnng 
the  other  "Income  Tax"  titles.  See  also 
Sec.  4,  Act  of  1917. 

"Fiduciary"  is  defined  in  Art.  29  of 
Keg.  No.  33  revised. 


A  "personal  service  corporation"  is 
not  defined  under  the  1917  act.  Sec.  209 
applies  primarily  to  businesses,  etc.,  en- 
gaged principally  in  rendering  "personal 
services,"  but  there  is  no  exemption  from 
tax  for  personal  service  corporations  simi- 
lar to  that  provided  in  the  1918  act. 

See  Art.  126  of  Reg.  No.  33  re\i8ed  for 
"paid." 


There  was  no  distinction  made  in  this 
act  in  the  case  of  dividends  paid  by  cor- 
porations which  under  the  Revenue  Act 
of  1918  would  be  classed  as  personal- 
service  corporations.     Sec.  31  (a). 

Sec,  31  (a),  Act  of  1916  as  amended. 


1918. 

TITLE  I.— GENERALDEFINITIONS. 

Sec.  1. — General  definitions. 

The  terms  "Government  contract," 
"military  or  naval  forces  of  the  United 
States,"  and  "present  war"  are  entirely 
new  in  this  act. 

The  terms  "Secretary,"  "Commis- 
sioner," "collector,"  "person,"  "tax- 
payer,"   "Revenue   Act  of   1916,"   and 

Revenue  Act  of  1917  "  are  not  defined  in 
the  1917  act,  but  when  used  in  applying 
that  act  have  the  same  meaning  as  de- 
fined in  the  1918  act. 

The  term  "United  States"  when  used 
in  a  geographical  sense  includes  only  the 
States,  the  Territories  of  Alaska  and 
Hawaii,  and  the  District  of  Coliunbia. 


TITLE  II.— INCOME  TAX. 

Part  I — General  Provisions. 

Skc.  200. — Definitions. 

The  "first  taxable  year"  means  the 
calendar  vear  1918  of  any  fiscal  year 
ended  in  1918. 


The  terms  "fiduciary,"  "withholding 
agent,"  "personal  service  corporation," 
and  "paid"  are  not  defined  in  the  1917 
act. 


Sec.  201  .—Dividends. 

The  term  dividend  includes  any  dis- 
tribution made  by  a  personal  service 
corporation  out  of  its  earnings  or  profits 
accumulated  only  between  February  28, 
1913,  and  January  1,  1918. 

Stock  di\idends  are  taxed  under  both 
acts. 


(5) 


BULLETIN  C. 


1917. 

Di^•idend8  in  general  received  by  indi- 
viduals were  taxable  at  the  rates  in  effect 
for  the  years  when  the  earnings  were 
accumulated.  Sec.  31  (6),  Act  of  1916  as 
amended. 


Dividends  received  by  corporations 
were  subject  to  income  tax,  but  only  at 
the  2  per  cent  rate,  or  at  1  per  cent  only 
if  from  earnings  or  profits  accumulated 
during  1913,  1914,  or  1915. 

Any  dividend  distribution  (except 
those  made  prior  to  Aug.  6,  1917,  out  of 
earnings  or  profits  accrued  prior  to  Mar.  1, 
1913)  were  deemed  to  have  been  made 
from  the  most  recently  accumulated  sur- 
plus or  undivided  profits,  even  though 
paid  during  the  first  60  days  of  the  taxable 
year.  This  provision  i ncluded  stock  divi- 
dends and  ^termined  the  rate  at  which 
the  dividend  was  taxed  in  the  hands  of 
stockholders.  Sec.  31(b),  Act  of  1916  as 
amended. 


In  the  case  of  sale  of  property  acquired 
prior  to  March  1,  1913,  its  fair  market 
price  or  value  as  at  that  date  shall  be  the 
basis  for  determining  the  gain  or  logs. 
Sed.  2(c),  5(a),  4  and  10(a),  Act  of  1916  as 
amended. 


Prior  to  the  date  of  T.  D.  2609  (Dec.  19, 
1917)  inventories  were  computed  on  the 
basis  of  cost.  Sec  also  T.  B.  R.  48, 
Bulletin  No.  16,  p.  3. 


No  dmilar  provisions  in  the  1917  act. 


1918. 

Dividends  in  general  received  by  indi- 
viduals are  taxed  at  the  rates  in  effect  for 
the  years  in  which  the  dividends  were 
received. 

Stock  dividends  received  by  indi- 
viduals between  January  1,  1918,  and 
March  27, 1919,  are  taxable  at  the  rates  in 
effect  for  the  years  in  which  the  earnings 
or  profits  distributed  were  accumulated. 

Dividends  received*  by  corporations 
from  corporations  subject  to  tax  and  from 
personal  service  corporations  out  of  earn- 
ings or  profits  upon  which  income  tax  has 
been  imposed  are  not  subject  to  income  or 
profits  taxes.    See  Sec.  234(a)  6. 

Dividend  distributions  are  deemed  to 
be  made  from  the  most  recently  accumu- 
lated earnings  or  profits  unless  made 
during  the  first  60  days  of  the  taxable 
year,  in  which  case  they  are  deemed  as 
made  from  earnings  or  profits  of  prior 
years.  This  does  not  affect  the  taxability 
of  the  di\idends  in  the  hands  of  stock- 
holders. 


Sec.  202.— Basis  for  determining  gain  or 
loss. 

The  same  pro\ision8  effective  under 
the  1917  act  apply  fvith  the  following  ex- 
ceptions: 

If  property  acc^uired  prior  to  March  1, 
1913,  is  inventoned  in  accordance  with 
Sec.  203,  its  inventory  value  is  the  basis. 

In  the  case  of  reorganizations,  mergers, 
or  consolidations  involving  exchange  of 
stock  for  stock  or  securities  of  bo  greater 
aggregate  par  or  face  value,  no  gain  or 
loss  is  deemed  to  occur  from  the  exchange. 

Sec.  203. — Inventories. 

Inventories  may  be  taken  on  any  basis 
prescribed  by  regulations  as  conforming 
to  the  best  accounting  practice  in  the 
trade  or  business  and  most  clearly  re- 
flecting the  income  of  the  taxpayer. 

The  regulations  (No.  45)  prescribe  that 
the  basis  shall  be  either  (a)  cost,  or  (6)  cost 
or  market  whichever  is  lower.    Art.  1582. 

Sec  204.— Net  losses. 

Th'is  section  allows  a  taxpayer  who  sus- 
tains a  "net  loss "  as  defined  in  (a)  for  any 
taxable  year  l)eginning  after  October  31, 
1918,  and  ending  prior  to  January  1,  1920, 
to  deduct  such  net  loss  from  the  net  in- 
come of  his  preceding  taxable  year  and 
have  his  taxes  adjusted  accordingly.  If 
the  net  loss  exceeds  the  net  income  of  the 
preceding  taxable  year,  the  excess  may 
be  deducted  from  the  net  income  of  the 
succeeding  taxable  year. 


BULLETIN  a 


1917. 


Under  the  revenue  act  of  1917  if  a  fiscal 
year  return  covered  portions  of  years  with 
different  tax  rates,  the  rates  in  effect  for 
each  year  were  applied  only  to  the  same 
proportionate  part  of  the  total  net  income 
as  the  number  of  months  falling  within 
such  year  bore  to  the  entire  period  cov- 
ered by  the  return.  Sec.  10(a),  Act  of 
1916  as  amended. 

Applicable  to  corporations  and  part- 
nerships only  since  individuals  were  not 
allowed  to  file  returns  on  a  fiscal-year 
basis  under  the  act  of  1917. 


No  similar  provision  in  this  act.  How- 
ever, similar  cases  arising  under  this  act 
axe  to  be  treated  in  the  same  manner. 


Sec.  1: 


1918. 

Sec.  205. — Fiscal  years  with  different  rates. 

Under  the  1918  act,  if  a  fiscal-year  re- 
turn covers  parts  of  years  subject  to  dif- 
ferent tax  rates,  both  the  net  income  and 
the  tax  are  computed  for  the  full  fiscal 
year  under  both  acts  in  effect  or  under 
both  rates,  and  the  same  number  of 
twelfths  of  each  result  taken  as  the  num- 
ber of  months  falling  within  each  year 
subject  to  different  rates. 

The  last  paragraph  of  Sec.  8(e),  Act  of 
1916  as  amended,  and  Sec.  218(b),  Act  of 
1918,  appear  to  outline  the  same  method 
of  taxing  partners'  shares  of  partnership 
profits  when  the  fiscal  year  of  the  partner- 
ship covers  parts  of  years  with  different 
tax  rates.  However,  Sec.  218(b)  is  modi- 
fied by  Sec.  205(c). 

Sec.  206. — Parts  of  income  subject  to  rates 
for  different  years. 

This  section  provides  that  when  parts 
of  a  taxpayer's  income  are  subject  to  rates 
for  different  years,  the  parts  subject  to 
the  rates  for  the  most  recent  calendar 
year  are  placed  in  the  lower  brackets  of 
the  tax-rate  schedules,  the  part  subject 
to  the  rates  for  the  next  preceding  calen- 
dar year  in  the  next  higher  brackets,  etc. 

Part  II.— Individuals. 

Sec.  210. — Normal  tax. 


NORMAL     TAX — CITIZENS     AND     RESIDENT 
ALIENS. 


Act  of  October  3,  1917,  2  per  cent  of 
net  income  in  excess  of  exemption. 

Act  of  September  8,  1916,  2  per  cent  of 
net  income  in  excess  of  exemption. 


NORMAL   TAX — NONRESIDENT   ALIENS. 


2  per  cent  of  total  net  income  from 
Bources  within  the  United  States. 


CITIZENS   AND   RESIDENT  ALIENS. 

For  1918. 

12  per  cent  of  the  amount  of  net  in- 
come in  excess  of  the  credits  provided 
in  Sec.  216;  provided,  the  rate  upon  the 
first  $4,000  of  such  amount  shall  be  6 
per  cent. 

For  subsequent  years. 

8  per  cent  of  the  amount  of  the  net 
income  in  excess  of  the  credits  provided 
in  Sec.  216;  provided  that  the  rate  upon 
the  first  $4,000  of  such  amount  shall  be  4 
per  cent. 

NONRESIDENT   ALIENS. 

For  1918. 

12  per  cent  of  total  net  income  from 
sources  within  the  United  States.  (Pos- 
sible credits;  see  Sec.  217.) 


BULLETIN  C. 


1917. 


For  excess  profits  tax  rates  see  Sees. 
201  and  209,  Act  of  1917. 


Sec.  1  (6),  Act  of  1916  as  amended. 

Sec.  2,  Act  of  1917. 

Under  this  act  surtaxes  were  imposed 
on  income  in  excess  of  $5,000,  as  in  the 
Act  of  1918,  but  income  in  excess  of 
120,000  was  subject  also  to  the  surtax 
imposed  by  the  Act  of  September  8,  1916. 

Under  the  1917  act  the  rateg  increased 
from  1  per  cent  on  the  amount  by  which 
the  total  net  income  exceeded  $5,000  but 
did  not  exceed  $7,500  to  50  per  cent  of 
the  net  income  in  excess  of  $1,000,000. 
Under  the  1916  act  the  surtax  ranged 
from  1  per  cent  on  the  net  income  ex- 
ceeding $20,000  and  not  exceeding  $40,000 
to  13  per  cent  on  the  amount  exceeding 
$2,000,000.  The  highest  surtax  rate  was 
thus  63  per  cent  on  net  income  in  excess 
of  $2,000,000. 

Under  the  provisions  of  Sec.  31  (6), 
Act  of  September  8,  1916,  as  amended, 
dividends  received  are  taxable  at  the 
rates,  surtax  only  (Sec.  5  (b),  Act  of  1916 
as  amended),  in  force  for  the  year  in  which 
the  amounts  distributed  were  accumu- 
lated. 

No  similar  provision  in  this  act. 


Sec.  2  (a),  Act  of  1916  as  amended,  de- 
fines net  income  in  the  case  of  an  indi- 
^ddual,  and  states  in  general  the  items  to 
be  included  in  gross  income.  Gross  in- 
come is  defined  in  separate  sections  in 
the  Act  of  1918. 

Individuals  were  permitted  to  make 
returns  on  a  basis  other  than  actual 
receipts  and  disbursements  provided  such 
method  correctly  reflected  their  net 
income,  but  all  returns  were  required  to 
be  on  a  calendar-year  basis.  (Sec.  8  (a) 
and  (g),  Act  of  1916  as  amended). 

Changes  in  accounting  period  under  the 
1917  act  applied  to  partnerships  [Sec. 
8(e)]  and  corporations  [Sec.  13(a)]  only 
which  were  allowed  to  establish  a  fiscal 
year  for  the  purpose  of  making  returns  by 
designating  the  last  day  of  any  month  as 


1918. 

For  subsequent  years. 

8  per  cent  of  total  net  income  from 
sources  within  the  United  States.  (Pos- 
sible credits;  see  Sec.  217.) 

Individuals  not  subject  to  profits  tax. 

Sec.  211.— Surtax. 

(a)  The  siu-tax  begins  with  a  tax  of  1 
per  cent  on  net  income  over  $5,000  and 
not  exceeding  $6,000.  The  rates  in- 
crease gradually  from  this  point  to  a 
maximum  of  65  per  cent  on  the  net  in- 
come in  excess  of  $1,000,000. 


All  dividends  received  by  individuals 
(except  stock  dividends  as  explained  in 
Sec.  201)  are  subject  to  surtax  rates  for 
years  in  Awhich  they  were  received. 


(h)  Surtax  in  the  case  of  bona  fide  sale 
of  mines,  oil  or  gas  wells,  or  any  interest 
therein,  where  uie  taxpayer  has  demon- 
strated principal  value  by  prospecting  or 
exploration  or  discovery  work  is  limited 
to  20  per  cent  of  the  selling  price  of  the 
property  or  interest. 

Sec.  212. — Net  income  defined. 

This  section  applies  to  all  taxpayers. 
(a)  Net  income  is  defined  as  gross  in- 
come less  allowable  deductions. 


(6)  Net  income  is  to  be  computed  on 
the  basis  of  the  taxpayer's  annual  account- 
ing period  (calendar  or  fiscal  as  the  case 
may  be)  in  accordance  with  the  method 
of  accounting  regularly  employed  in 
keeping  his  books,  unless  such  method 
does  not  clearly  reflect  the  income. 

A  change  in  accounting  period  for  the 
purpose  01  computing  net  income  may  be 
maae  only  upon  approval  by  the  Comr- 
missioner.  Notice  of  such  change,  to- 
gether with  reasons  therefor,  must  be 
filed  (1)  at  least  30  days  before  the  due 


BULLETIN  C. 


1917. 

the  close  of  the  fiscal  year,  and  ghing 
notice  of  such  action  to  the  collector  for 
the  district  in  which  their  principal 
offices  were  located.  This  notice  waa 
required  to  be  filed  at  least  30  days  before 
the  due  date  of  the  return  for  the  existing 
taxable  year.  Provision  was  made  in 
Reg.  33  revised  for  changing  from  a  fiscal 
year  to  a  calendar  year  (Art.  217)  and 
Irom  one  fiscal  year  to  another  (Art.  213). 


See  Sec.  2  (a),  Act  of  1916  as  amended, 
income  defined,  individuals.  Gross  in- 
come of  corporations  is  not  specifically 
defined. 

Under  this  act  the  items  mentioned  in 
Sec.  213  (b)  6,  Act  of  1918,  were  taxable. 


See  Sec.  4,  Act  of  1916  as  amended. 


Sec.  30,  Act  of  1916  as  amended. 


The  items  to  be  included  in  gross  in- 
come by  nonresident  alien  individualB 
are  practically  the  same  under  both  acts. 


Sec.  5  (a),  First. 


1918. 

date  of  the  return  for  the  existing  taxable 
year,  and  (2)  at  least  30  days  before  the 
due  date  of  the  return  for  the  proposed 
taxable  year.  Upon  approval  of  a  change 
returns  must  be  made  in  accordance  with 
Sec.  226. 

A  taxpayer  who  has  an  existing  fiscal 
year  accounting  period  needs  no  per- 
mission to  file  returns  on  such  basis,  but 
is  required  to  do  so  by  the  act  regardless 
of  how  prior  returns  were  filed.  See 
Arts.  25  and  26  of  Reg.  No.  45. 

Sec.  213. — Gross  income  defined. 

(a)  Inclusions. 

New  in  1918  act: 

The  salaries  of  the  President  of  the 
United  States  a.id  Judges  of  the  Supreme 
and  inferior  courts  of  the  United  States 
and  all  other  officers  and  employees, 
whether  elected  or  appointed,  of  the 
United  .States,  Alaska,  Hawaii,  or  any 
political  subdivision,  or  the  District  of 
Columbia,  must  be  included  in  gros» 
income. 

(6)  Exclusions. 

New  in  1918  act: 

Proceeds  of  life  insurance  policies  when 
paid  to  the  estate  of  the  insured. 

Interest  on  obligations  of  a  territory  or 
of  the  District  of  Columbia. 

Interest  on  bon(fc  issued  by  the  War 
Finance  Corporation  to  the  extent  pro- 
vided in  the  act  authorizing  their  issue. 

Amounts  received  through  accident  or 
health  insurance  or  under  workmen's 
compensation  acts,  as  compensation  for 
personal  injuries  or  sickness,  plus  the 
amount  of  any  damages  received  whether 
by  suit  or  agreement  on  account  of  such 
injuries  or  sickness. 

So  much  of  the  amount  received  during 
the  present  war  by  a  person  in  the  military 
or  naval  forces  of  the  United  States  for 
active  service  in  such  forces,  as  does  not 
exceed  $3,500. 

That  part  of  (b)  5  reading  as  follows: 
"or  from  any  other  source  within  the 
United  States." 

(c)  Nonresident  alien  individuals. 

This  part  of  Sec.  213  is  new  as  the  Act 
of  1917  does  not  specifically  define  gross 
income  in  the  case  of  a  nonresident  alien 
individual. 

Sec.  214. — Deductions  allowed. 

(a)  1.  Business  expenses. 

The  words  "not  including  personal, 
living,  or  family  expenses"  are  omitted 
from  this  section  but  are  treated  sepa- 
rately under  Sec.  215,  Items  not  deducti- 
ble. The  effect  is  the  same. 
New  in  1918  act: 

"Including  a  reasonable  allowance  for 
salaries  or  other  compensation  for  personal . 


163878"— 20 2 


BULLBTIN  C 


10 


1917. 


Sec.  5  (a),  Second. 


Sec.  5  (a),  Third. 

Taxes  "paid"  (Sec.  5a,  Third  and  Sec. 
12  (a),  Fourth);  but  see  also  Arts.  126  and 
127,  Reg.  33  revised. 

No  taxes  assessed  against  local  benefits 
were  deductible  under  this  act. 

Nonresident  aliens  were  not  allowed  to 
deduct  foreign  taxes  under  the  1917  act. 
Sec.  6  (a)  Third,  act  of  1916  as  amended. 


Sec.  5  (a).  Fourth. 
Sec.  5  (a),  Fifth. 


fiec.  5  (a),  Fourthl 


Sec.  5  (a),  Sixth, 


1918. 

services  actually  rendered,  and  including 
rentals  or  otlwr  payments  required  to  be 
made  as  a  condition  t-o  the  continued  use 
or  possession  for  purposes  of  the  trade  or 
business  of  property  to  which  the  tax- 
payer has  not  taken  or  is  not  taking  title 
or  in  which  he  has  no  equity.  " 

While  the  above  clause  is  new  in  the 
1918  act,  similar  deductions  were  allow- 
able under  the  1917  act. 

(a)  2.  Interest. 
New  in  1918  act: 

"Accrued,"  in  the  first  line.  (This 
makes  no  real  change,  since  accrued 
interest  was  permitted  as  a  deduction 
under  the  1917  act  if  charged  on  the 
books  and  if  income  is  reported  on  an  ac- 
crual basis.) 

The  amount  of  interest  paid  on  indebt- 
edness incurred  or  continued  in  carrying 
or  purchasing  obligations  of  the  United 
States  issued  after  September  24,  1917, 
the  interest  upon  which  is  entirely 
exempt  from  tax. 

(a)  (3).  Taxes. 
New  in  1918  act: 

"Or  accrued  "  in  first  line. 


That  part  of  subdivision  (c)  reading  as 
follows:  "of  a  kind  tending  to  increase 
the  value  of  the  propertj^  assessed." 

Subdivision  (e)  is  new  in  that  it  allows 
a  nonresident  alien  individual  to  deduct 
foreign  taxes,  other  than  income,  excess 
profits,  or  local  benefit  taxes,  but  only  to 
the  extent  they  are  connected  with  in- 
come arising  from  United  States  sources. 

(a)  (4),  (5),  (6).  Losses. 

(4)  Same  as  1917  act. 

(5)  Same  as  1917  act  except  that  the 
restriction  "not  compensated  by  insur- 
ance or  otherwise "  is  added ,  and  the 
limitation  of  the  deduction  to  "an  amount 
not  exceeding  the  profits  arising  there- 
from" is  removed. 

<Q)  Same  as  1917  act,  except  for  words 
"but  in  the  case  of  a  nonresident  alien 
individual,  only  property  within  tiie 
United  States. "' 

The  uel  effect  of  the  changes  in  this 
subdivision  (4,  5,  6)  is  to  allow  the  de- 
duction of  all  losses  sustained  during  the 
year  in  transactions  entered  into  for 
profit,  whether  or  not  connected  with  the 
regular  business. 

(a)  7.  Bad  debts. 

Same  as  1917  act. 


Sec.  5  ^a),  Seventh, 


(a)  8.  Depreciation. 


n 


BULLETIN  C. 


1917. 


1918. 


No   provision   for   obsolescence   under 
the  1917  act. 

No  similar  provision  in  the  1917  act. 


Sec.  5  (a),  Eighth. 


See  Art.  173,  Reg.  33  revised. 


In  the  case  of  leased  property,  only  the 
bonus  payment  for  the  lease,  not  the 
value  as  at  March  1,  1913,  was  the  basis 
for  depletion. 

No  similar  provision  in  the  1917  act. 


Sec,  5  (a),  Ninth. 


No  similar  provision. 


New  in  1918  act: 

"Including  a  reasonable  allowance  for 
gbsolescence. ' ' 

(a)  9.  Amortization. 

Entirely  new  in  1918  act. 

(a)  10.  Depletion. 

Depletion  is  allowed  in  the  same  cases 
as  in  the  1917  act. 

"Other  natural  deposits"  and  "tim- 
ber" were  not  mentioned  in  the  1917  act, 
although  depletion  was  allowed  in  both 
cases. 

In  the  case  of  leased  mines,  depletion 
is  to  be  "equitably  apportioned  between 
lessor  and  lessee." 

In  the  case  of  mines,  oil  and  gas  wells 
discovered  after  March  1,  1913,  and  not 
acquired  in  purchasing  a  proven  tract  or 
lease,  the  value  at  the  time  of  discovery 
or  within  30  days  thereafter  is  the  basis 
for  depletion. 

(a)  11.  Charitable  contributions. 

New  in  1918  act: 

Contributions  to  the  special  fund  for 
vocational  rehabilitation  are  deductible. 

Nonresident  aliens  are  allowed  to  de- 
duct only  contributions  or  gifts  to  domes- 
tic corporations  or  to  the  vocational  re- 
habilitation fund. 

(a)  12.  Loss  in  inventory. 

This  subject  is  entirely  new  in  the  1918 
act. 


Sec.  6  {ja),  First  to  Seventh,  inclusive.         (b)  Nonresident  aliens. 


In  the  case  of  nonresident  aliens  the 
same  differences  in  allowable  deductions 
as  between  the  1917  and  1918  acts  apply 
as  in  Subdivision  (a)  1  to  12  of  this  section, 
except  as  to  taxes  and  charitable  contri- 
butions. The  differences  in  these  items 
are  shown  in  (a)  3  and  11.  As  in  the  1917 
act,  the  deductions  may  be  allowed  only 
to  the  extent  they  are  connected  with 
income  arising  from  sources  within  the 
United  States. 


BULLETIN  C 


12 


1917. 


No  similar  section  under  the  1917  act. 
The  several  items  menti  med  in  the  1918 
act  are  all  provided  for  in  the  sections 
covering  deductiins.  Sees.  5  (a),  First, 
6  (a),  First,  and  32. 


Pecs.  1  (b)  and  5  (b),  Act  of  1916  as 
amended. 


Sec.  7,  Act  of  1916  as  amended. 

$3,000  to  a  single  person. 

$4,000  to  a  married  person  living  with 
husband  or  wife. 

These  exemptions  only  for  the  2  per 
cent  normal  tax  under  this  act. 

Sec.  3,  Act  of  1917: 

$1,000  to  a  single  person. 

$2,000  to  a  married  person  living  with 
husband  or  wife,  or  to  the  "head  of  a 
family. " 

These  exemptions  only  for  the  2  per 
cent  additional  normal  tax  under  this 
Act. 

$200  for  each  child    *    *    *. 

No  personal  exemption  or  credit  for 
dependents  allowed  to  nonresident  aliens 
under  the  1917  act. 


1918. 

Sec.  215. — Item*  not  deductible. 
Same  as  1917  act. 

Sec.  2]&.— Credits  alloued. 

(a)  Same  as  1917,  except  that  dividends 
distributed  by  personal  service  corpora- 
tions from  tax-paid  earnings  or  profits  are 
included. 

(6)  New  in  1918  act.  but  note  that  only 
interest  on  United  States  obligations 
issued  after  September  1,  1917,  is  required 
to  be  included  in  gross  income. 


(c)  $1,000  to  a  single  person. 

$2,000  to  a  married  person  living  with 
husband  or  wife  or  to  the  "head  of  a 
family. " 


(</)  $200  for  each  person    •    •    ♦. 
(e)  Entirely  new  in  1918  act. 

Sec.  217. — Nonresident  aliens. 


Sec.  6  (a),  Act  of  1916  as  amended. 


Partnerships  not  subject  to  "income 
tax." 
Sec.  8  (e),  Act  of  1916  as  amended. 


Subject  to  excess  profits  tax  if  net  in- 
come exceeded  $6,000. 


ALLOWANCE   OF  DEDUCTIONS   AND 
CREDITS. 

Practically  same  as  1917  act.  except 
that  provision  is  made  for  claiming  the 
credits  provided  in  Sec.  216  (c)  and  (d) 
by  filing  a  claim  therefor  with  the  with- 
holding agent. 

Sec.     218. — Partnerships    and    personal- 
service  corporations. 

(a)  Same  as  1917  act,  but  every  part- 
nership must  file  an  income  return  re- 
gardless of  the  amount  of  net  income. 
Sec.  224. 

Not  subject  to  war  profits  or  excess- 
profits  tax. 


13 


BULLETIN  C. 


1917. 

Sec.  8  (e),  Act  of  1916  as  amended. 


Partnerships  not  required  to  file  re- 
turns unless  requested  by  Commissioner. 
Sec.  8(e)  and  Art.  30,  Re?.  33  revised. 

The  subject  of  personal  service  corpora- 
tions is  not  covered  in  the  1917  act. 


Sec.  2(b),  act  of  1916  as  amended. 

CH&ritable  contributions  when  allowed 
to  estates  and  trusts  under  the  1917  act 
are  limited  to  15  per  cent  of  the  net  in- 
come as  computed  without  such  deduc- 
tion. 


Sec.  3,  Act  of  1916  as  amended. 

If  this  section  is  applied  to  any  cor- 
poration, it  is  not  taxed  as  a  corporation 
but  its  entire  net  income,  whether  dis- 
tributed or  not,  must  be  accounted  for  by 
the  shareholders. 


Sec.   9   (b)  and  (c),   Act   of  1916  as 
amended. 


1918. 

(b)  This  subdivision  applies  the  same 
principle  as  the  1917  act,  but  it  must  be 
read  and  applied  in  connection  with  Sec. 
205  (c)  of  the  1918  act.  For  further  ex- 
planation see  Arts.  324  and  1621  of  R^, 
No.  45. 

(c)  New  in  1918  act. 

(d)  New  in  1918  act. 


(e)  New  in  1918  act:  Personal  service 
corporations  are  treated  in  the  same  man- 
ner as  partnerships:  that  is,  they  are  not 
subject  to  income  or  profits  taxes  but 
must  file  returns. 

Sec  219. — Estates  and  trusts. 

(a)  Same  as  1917  act. 

(b),  (c),  and  (d)  are  new  in  the  1918 
act,  but  the  same  principles  apply  under 
the  1917  act  except  that  part  of  (6)  cov- 
ering the  deduction  allowed  in  fiduciary 
returns  in  lieu  of  that  allowed  under  Sec. 
214  (a.)  11.  This  deduction  is  limited 
only  to  the  amount  paid  or  set  aside  pur- 
suant to  the  terms  of  the  will  or  deed 
creating  the  trust. 

Sec.  220. — Profits  of  corporations  taxable 
to  stockholders. 

This  section  differs  from  Sec.  3  of  the 
1917  act  as  follows: 

"Fraudulently"  is  omitted. 

Mere  holding  companies  are  held  to  be 
prima  facie  of  the  class  described  in  this 
section.  When  this  section  is  applied  to 
a  corporation  it  shall  not  be  subject  to 
the  taxes  imposed  by  Sec.  230  but  shall 
be  subject  to  the  tax  imposed  bv  Title 
III  of  the  1918  act,  which  tax  shall  be 
deducted  from  the  net  income  before  the 
computation  of  the  proportionate  share 
of  each  stockholder. 

Sec  221. — Payment  of  tax  at  source. 

This  subject  is  treated  in  essentially 
the  same  manner  as  in  the  1917  act  ex- 
cept for  the  difference  in  rates. 

New  in  1918  act: 

The  Commissioner  may  authorize  with- 
holding of  tax  at  highest  applicable  rates 
on  interest  upon  securities  the  owners  of 
which  are  not  known  to  the  withholding 


Highest  rate  on  individuals  2  per  cent. 

Same  principle  is  applicable  under  the 
1917  act. 


Highest  rate  on  individuals  8  per  cent, 
(e)  Not  covered  in  the  1917  act. 


BULLETIN  C. 


14 


1917. 


Not  covered  in  1917  act. 


Under  the  1917  act  returns  were  re- 
quired of  every  person  of  lawful  age  hav- 
ing net  income  in  excess  of  certain  speci- 
fied exemptions. 

Sec.  8  (b)  and  (c).  act  of  1916  as 
amended,  and  Sec.  3,  Act  of  1917. 


Partnerships  required  to  file  returns 
only  when  requested  to  do  so  by  the 
Commissioner  or  any  collector.  Sec. 
8  (e),  act  of  1916  as  amended.  Excess 
profits  tax  returns  were  required  if  the 
net  income  for  the  taxable  year  was 
$6,000  or  more. 


Sec.  8(c),  act' of  1916  as  amended. 


Individuals  were  not  allowed  to  file 
fiscal  year  returns  under  this  act. 

See  arte.  211,  213,  214,  215,  and  217, 
Reg.  No.  33  revised. 


Sees.  8  (b)  and  13  (b),  act  of  1916  as 
amended. 

Calendar  year  returns  were  required 
to  be  filed  on  or  before  March  1,  of  the 
succeeding  year  and'  fiscal  year  retiuTis 
within  60  days  after  the  close  of  the 
taxable  year. 

"The  Commissioner  shall  have  author- 
ity to  grant  a  reasonable  extension  of  time 
*    *    *    ."     Sec.  8(b). 

Not  covered  in  the  1917  act. 


Sec.  19,  act  of  1916  as  amended. 


Sec.  10  (a),  Act  of  1916  as  amended. 
2  per  cent  on  net  income. 

Sec.  4,  Act  of  1917,  4  per  dent  additional 
on  net  income. 

Credite  were  allowed  against  net  income 
as  follows: 


1918. 

Sec.  222.— Credit  for  taxes. 

Entirely  new  in  1918  act. 

Sec  223. — Individual  returns. 

This  act  requires  returns  ol  every  indi- 
vidual having  net  income  in  excess  of 
certain  specified  exemptions. 


Sec  224. — Partnership  returns. 

Every  partnership  required  to  file  a 
return  regardless  of  tne  amount  of  income. 


Sec  225. — Fiduciary  returns. 

Same  as  1917  act. 

Sec.  226. — Returns  wJien  accounting  period 
changed. 

Provisions  for  filing  returns  by  taxpay- 
ers when  accounting  period  changes. 


Sec  227. 


■Time  and  place  for  filing  re- 
turns. 


Same  as  1917  act,  except  as  follows: 

Returns  must  be  filed  on  or  before  the 
15th  day  of  the  third  month  following  the 
close  of  the  fiscal  year,  or  in  the  case  of  a 
calendar-year  return,  on  or  before  the 
15th  day  of  March  of  the  succeeding  year. 

Except  in  the  case  of  persons  abroad, 
no  extension  of  time  for  filing  returns  may 
be  for  more  than  six  months. 

The  Commissioner  shall  keep  a  record 
of  the  extensions  of  time  granted  and  the 
reasons  therefor. 

Sec  228. —  Understatement  in  returns. 

Same  as  1917  act. 

Part  III. — Corporations. 

Sec  230. — Tax  on  corporations. 

(a)  For  1918,  12  per  cent  on  net  income 
in  excess  of  credits. 

For  subsequent  years,  10  per  cent  on 
net  income  in  excess  of  credits. 


15 


BULLETIN  C. 


1917. 

For  the  purpose  of  the  4  per  cent 
additional  tax,  dividends  received  from 
taxable  corporations  and  the  amount  of 
any  excess-profits  tax  assessed  for  the 
same  calendar  or  fiscal  year.  Sec.  29, 
Act  of  1916,  as  amended,  and  Sec.  4, 
Act  of  1917. 

The  amount  of  excess  profits  tax 
assessed  was  a  credit  for  the  2  per  cent 
tax  also  (Sec.  29)  but  dividends  were 
subject  to  tax  at  2  per  cent  if  from  1916  or 
1917  earnings  and  at  1  per  cent  if  from 
earnings  of  1913,  1914  or  1915. 

Sec.  10  (b).  Tax  on  undistributed  in- 
come of  corporations. 


Sec.  11,  Act  of  1916  as  amended. 


1918. 

(For  war  and  excess  profits  rates  see 
Sec.  301.) 


See  Sec.  12  (a),  Act  of  1916  as  amended. 


Gross  income  not  defined. 

Sec.  12  (a).  Second,  Act  of  1916  as 
amended. 

Not  specifically  defined  in  the  1917  act. 
See  Sec.  12  (b),  Act  of  1916  as  amended. 


Sec.  12  (a).  First,  Expenses  "paid." 
Applied  same  as  1918  act.  See  Art.  126, 
"Reg.  33  revised. 

Sec.  12  (a).  First,  Second,  and  Fovuth, 
Act  of  1916  as  amended. 

Sec!  12  (a).  Third. 

Deduction  of  interest  was  limited  to 
the  amount  paid  on  its  indebtedness 
(except  on  indebtedness  incurred  for 
the  purchase  of  obligations  or  securities 
the  interest  upon  which  was  exempt 
from  tax)  to  an  amount  of  such  indebt- 
edness not  exceeding:  (a)  The  entire 
amount  pf  the  paid-up  capital  stock  out- 
standing at  the  close  of  the  year,  or,  if  no 
capital  stock,  the  entire  amount  of  capital 
employed  in  the  business  at  the  close  of 
the  year  plus,  (6)  One-half  of  the  interest- 
bearing  indebtedness  then  outstanding. 


No  similar  provision  in  1918  act. 

(6)  New  in  1918  act. 

Sec  231. — Conditional  and  other  exemp' 
tions. 

Same  as  1917  act  except  as  follows: 

Additional  exemptions: 

(6)  Organizations  organized  and  oper- 
ated exclusively  for  the  prevention  of 
cruelty  to  children  and  animals. 

(14)  Personal-service  corporations. 

Exemptions  eliminated: 

Joint  stock  land  banks. 

Sec.  232. — Net  income  defined. 

See  comparison  under  Sec.  212. 

Sec.  233. — Gross  income  defined. 

(a)  See  comparison  under  sec.  213  (a), 
(a)  1  and  2  same  as  1917  act.  » 

Practically  the  same  items  were  re- 
quired to  be  included  in  gross  income  of 
foreign  corporations  under  the  1917  act. 

Sec.  234. — Deductions  allowed. 

(a)  1.  Expenses  "paid"  or  " incurred '^ 
*    *    * 

(/  \  o  K        See  comparison  under  Sec. 
«^U214(a^ 
(a)  14  ^^™®  ^  ^^^'^  *^*- 

(a)  2.  All  interest  paid  or  accrued  on 
indebtedness  is  deductible  except  on 
indebtedness  incurred  or  continued  to 
piu-chase  or  carry  securities  the  interest 
upon  which  is  exempt  from  tax:  but 
interest  on  indebtedness  incurred  or 
continued  to  purchase  or  carry  obliga- 
tions of  the  United  States  issued  after 
September  24,  1917,  is  deductible. 


■BULLETIN  C. 


16 


1917. 

Interest  on  collateral  indebtedness  se- 
cured by  property  the  subject  of  sale  in 
the  ordinary  course  of  the  business  was 
deductible  as  an  expense  of  doing  busi- 
ness but  was  limited  to  the  interest  paid 
on  an  amount  of  such  indebtedness  not 
exceeding  the  actual  value  of  the  prop- 
erty collateral. 

Under  the  1917  act  dividends  received 
were  subject  to  income  tax,  but  only  at 
the  2  per  cent  rate,  or  at  1  per  cent  only 
if  from  earnings  of  1913,  1914,  or  1915. 
For  the  piu-pose  of  the  4  per  cent  addi- 
tional tax,  tney  were  an  allowable  credit 
against  net  income.     Sec.  4,  act  of  1917. 

Dividends  from  taxable  corporations 
were  not  subject  to  excess-profita  tax. 
Sec.  206  (c),  Act  of  1917. 

Skc.  12  (a),  Second  (c). 


Sec.  12  (a),  Second  (c). 
Sec.  12  (a),  Second  (c). 

Sec  12  (b).  Act  of  1916  as  amended. 

The  allowable  interest  deduction  in  the 
■case  of  a  foreign  corporation  was  the 
interest  paid  on  an  amount  of  its  indebt- 
edness not  exceeding  the  same  proportion 
of  the  sum  of  its  paid  up  capital  stock  and 
one  half  of  its  interest  bearing  indebted- 
ness both  outstanding  at  the  close  of  the 
year  as  its  gross  income  from  business 
transacted  and  capital  invested  in  the 
United  States  bore  to  the  gross  income 
from  all  sources  within  and  without  the 
United  States. 


See  Sees.  6,  12,  and  32,  Act  of  1916 
as  amended. 


Under  the  1917  act  interest  from  obli- 
gations of  the  United  States  was  not  re- 
auired  to  be  included  in  gross  income, 
•uierefore  no  credit  was  required  as  to  net 
income.  That  part  of  such  interest  in- 
come subject  to  excess-profits  tax  was 
added  to  the  net  income  for  income-tax 
purposes.  See  Form  1103,  Schedule  I, 
Item  2. 

Bonds  of  the  War  Finance  Corporation 
are  not  mentioned  in  the  1917  act. 

Sec.  29,  act  of  1916  as  amended. 

In  the  case  of  return  for  a  fiscal  year 
«nded  in  1917  the  excess-profits  tax  for 
the  portion  of  the  year  falling  within  1917 
is  deducted  from  the  net  income  for  the 
full  fiscal  year  before  apportioning  the  net 
income  for  the  purpose  of  applying  th« 
4  per  cent  additional  tax. 


1918. 


(a)  6.  Under  the  1918  act,  dividends 
received  from  corporations  subject  to 
taxation  or  from  personal  service  corpo- 
rations out  of  tax-paid  earnings,  are  not 
subject  to  tax.  They  must  l)e  included 
in  gross  income  but  are  deductible  under 
this  subdivision. 

Same  as  1917  act. 


(a)  10.  Same  as  1917  act. 

(a)  11.  Not  covered  in  1917  act. 

(a)  12.  Same  as  1917  act. 

(a)  13.  Same  as  1917  act. 

(b)  See  comparison  under  Sec.  214  (b). 
Same  general  limitation  as  in  1917  act 
except  in  the  case  of  interest. 


Sec  235. — Items  not  dedtictible. 
See  comparison  under  Sec.  215. 
Sec  236. — Credits  allowed. 
(a)  New  in  1918  act. 


(6)  Same  as  1917  act. 

In  the  case  of  a  return  for  a  fiscal  year 
ended  in  1918  this  subdivision  must  be 
applied  in  accordance  with  Sec.  205  (a). 


17 


BULLETIN  C. 


1917. 


Sec.  13  (f),  act  of  1916  as  amended. 

A  tax  of  2  per  cent  shall  be  withheld 
on  dividends  upon  the  capital  stock  or 
from  the  net  earnings  of  domestic  or  other 
resident  corporation  payable  to  nonresi- 
dent alien  companies  not  engaged  in 
business  or  trade  within  the  United  States 
and  not  having  any  office  or  place  of  busi- 
ness therein. 

Sec.  13  (e),  act  of  1916  as  amended. 

Interest  on  bonds  of  domestic  corpora- 
tions payable  to  nonresident  alien  corpo- 
rations is  subject  to  withholding  at  the 
rate  of  6  per  cent. 

If  such  corporation  haa  an  office,  agent, 
or  a  place  of  business  in  the  United  States, 
certificate  Form  1001  shall  be  filed  estab- 
lishing such  fact  and  relieving  the  cor- 
poration from  the  deduction  of  tax  at  the 
source. 


Sec.  13  (a)  to  (d),  act  of  1916  as  amended. 


No  provision  in  the  1917  act  for  con- 
solidated returns  for  income-tax  purposes, 
but  they  were  required,  or  allowed  under 
certain  conditions  for  excess-profits-tax 

Surposes.    See  Arts.  76  and  77  of  Reg. 
0.  41  and  T.  D.  2662— T.  D.  2901  mo<U- 
fied  paragraph  F  of  T.  D.  2662. 


Sec.  13,  act  of  1916  as  amended. 

Calendar-year  returns  were  due  March  1 
of  the  succeeding  year.  (Time  for  filing 
all  1917  fiscal  and  calendar  year  returns 
was  extended  to  April  1,  1918,  by  T.  D. 
2650.) 

Fiscal  year  returns  were  due  60  days 
after  the  close  of  the  fiscal  year. 


1918. 

(c)  New  in  1918  act. 

Sec.  237. — Payment  of  tax  at  tmirce. 

A  tax  of  10  per  cent  shall  be  withheld 
in  the  case  of  fixed  or  determinable  annual 
or  periodical  income  (other  than  divi- 
dends from  corporations  liable  to  the  in- 
come tax  and  interest  upon  corporate 
bonds  containing  a  tax-free  covenant 
clause)  payable  to  a  foreign  corporation 
not  engaged  in  trade  or  business  within 
the  United  States  and  not  having  an 
office  or  place  of  business  therein,  also  a 
tax  of  2  per  cent  on  tax-free  covenant 
bonds  paid  to  a  foreign  corporation  not 
having  an  office  or  place  of  business 
within  the  United  States.  Withholding: 
at  10  per  cent  is  also  required  from  interest 
on  bonds  or  other  securities  where  the 
owner  of  such  securities  is  unknown  to 
the  withholding  agent. 

Sec.  2i?,.— Credit  for  taxes. 

New  in  1918  act.  See  comparison  un- 
der Sec.  222. 

Sec.  239. — Corporation  returns. 

Same  as  1917  act  except  the  followingr 

Provision  requiring  an  agent  of  a  non- 
resident foreign  corporation  to  file  a  re- 
turn for  the  corporation. 

Returns  of  all  corporations  are  subject 
to  the  provisions  of  Sees.  226,  227» 
and  228. 

Provision  for  prorating  the  specific  ex- 
emption of  $2,000  in  the  case  of  returns 
under  Sec.  226. 

Sec.  240. — Consolidated  returns. 

New  in  1918  act  for  income-tax  pur> 
poses. 


Sec.    241. — Tiine    and   place  for  filing 
returns. 

(a)  Calendar-year  returns  must  be  filed 
on  or  before  March  15  of  the  succeeding 
year  and  fiscal  year  returns  on  the  15th 
day  of  the  third  month  following  the  close 
of  such  fiscal  year  J  otherwise  same  as  in 
1917  act. 


163878°— 20 3 


BULLETIN  C 


18 


1917. 


Sees.  9  (a)  and  14  (a),  act  of  1916  aa 
amended. 

Tax  must  be  paid  on  or  before  June  15 
of  the  succeeding  year  except  in  the  case 
of  fiscal-year  returns,  when  the  tax  must 
be  paid  on  or  before  the  expiration  of  105 
days  after  the  time  fixed  by  law  for  filing 
the  return.  The  provision  as  to  fiscal- 
year  returns  does  not  apply  to  individuals. 

Sec.  1009,  act  of  1917. 

Provision  is  made  in  this  section  for 
payment  of  tax  in  installments  as  follows: 

At  least  one-fourth  on  or  before  30  days 
after  the  close  of  thp  taxable  year. 

At  least  one-fourth  within  2  months 
after  the  close  of  the  taxable  year. 

At  least  one-fourth  within  4  months 
after  the  close  of  the  taxable  year. 

■Remainder  on  or  before  the  time  fixed 
by  law  fSc<  Sees.  9  (a)  and  14  (a)]  for  pay- 
ment 01  the  tax. 

When  paid  in  advance  as  outlined 
credit  is  allowed  against  such  advance 
payments  at  not  exceeding  3  per  cent 
per  annum  computed  on  the  amount  so 

r'd  from  the  date  paid  to  the  time  fixed 
law  for  payment  of  the  tax. 
No  credit  allowed  on — 

(a)  Amounts  exceeding  the  taxes  deter- 
mined to  be  due. 

(b)  Any  payment  made  after  4^  months 
^)llowing  the  close  of  the  taxable  year. 

No  similar  provision  in  1917  act. 


Sec.  16,  Act  of  1916  as  amended. 

Sees.  9  (a)  and  14  (a),  Act  of  1916  as 
amended. 

Sees.  9  (a)  and  14  (a).  Act  of  1916  as 
amended. 

Three-year  limitation  under  the  1917 
act.  The  limitation  is  not  necessarily  on 
the  assessment,  but  upon  the  discovery 
of  delinquency  or  error  within  three 
years. 


Sees.  9  (a)  and  14  (a)  Act  of  1916.  as 
amended. 
Arts.  262  and  263,  Reg.  No.  33,  revised. 


1918. 
Part  IT. — Administratlre  Prorlstons. 

Sec.  250. — Payment  of  tax. 

(a)  Payment  of  tax  authorized  in 
installments  as  follows: 

One-fourth  at  the  time  fixed  by  law  for 
filing  the  returns  and  equal  payments  in 
three,  six  and  nine  months,  respectively, 
thereafter. 

An  extension  of  time  for  filing  the 
returns  extends  the  time  of  payment  of 
first  installment  of  tax  only  unless  other- 
wise provided  in  the  extension. 

Interest  at  i  of  1  per  cent  a  month  is 
added  to  any  installment  payment  post- 
poned at  taxpayer's  request. 

Entire  tax  payable  on  notice  and 
demand  if  any  installment  is  not  paid 
when  due. 

Entire  tax  may  be  paid  in  one  install- 
ment on  or  before  the  time  fixed  by  law 
for  filing  the  return,  or,  if  an  extension  has 
been  granted,  on  or  before  the  expiration 
of  the  extension. 


(6)  Provides  for  prompt  examination  of 
the  return  and  determination  of  correct 
amount  of  tax,  recomputation  of  install- 
ments, and  adjustment  of  payments  due 
either  by — 

(1)  Crediting  any  overpayment  against 
subsequent  installments  or  by  refund. 

(2)  Requiring  payment  upon  notice  and 
demand  of  any  deficiency  in  installments 
due. 

Provides  penalties  for  understatements 
due  to  negligence  or  willful  fnnid. 

(c)  Tax  IS  due  upon  notice  and  demand 
if  return  is  made  under  Sec.  3176,  R.  S., 
as  amended. 

(d)  Provides  a  five-year  limitation  for 
determination  and  assessment  of  tax  or 
suit  or  proceeding  for  collection  of  tax 
except  in  the  case  of  false  or  fraudulent 
returns  with  intent  to  evade  the  tax.  in 
which  case  there  is  no  limit  for  collection 
of  the  tax. 

(The  five-year  limitation  is  on  taxes 
imposed  by  the  Act  of  1918  only.    ()-833). 

(e)  Provides  for  5  per  cent  penalty  and 
1  per  cent  per  month  interest  on  any  un- 
paid tax  from  the  time  due  until  paid, 
except  that  such  penalty  and  interest  will 


19 


BULLETIN  C. 


1917. 


Taxpayers  shall  be  notified  of  the 
amounts  for  which  they  are  liable  on  or 
before  June  1  of  each  year. 

Sees.  9  (a)  and  14  (a),  act  of  1916,  as 
amended. 

No  similar  provision  in  1917  act. 


No  similar  provision  in  1917  act. 


Sec.  16,  Act  of  1916  as  amended;  sec. 
3176,  R.  S.,  as  amended. 


1918. 

not  apply  to  that  part  of  such  tax  covered 
by  a  bona  fide  claim  for  abatement. 

Instructions  on  returns  are  considered 
sufficient  notice  and  demand  in  case  of 
first  installment  of  tax. 


(/)  New  in  1918  act.  Five  dollars 
added  to  the  tax  when  necessary  to  serve 
a  warrant  of  distraint. 

(g)  Procedure  for  collection  of  taxes 
from  taxpayers  designing  to  leave  the 
United  States  or  to  remove  their  property 
therefrom. 

Sec.  3176,  R.  S.,  as  amended  by  Sec. 
1317,  Act  of  1918. 


AD   VALOREM    PENALTIES. 

Failure  to  file  returns  within  prescribed 
time,  50  per  cent  of  tax. 

If  filed  voluntarily  and  without  notice 
from  collector,  and  delay  is  due  to  reason- 
able cause,  none. 

False  or  fraudulent  returns  willfully 
made,  100  per  cent  of  tax. 


Sec.  17,  Act  of  1916  as  amended. 
"It  shall  be  the  duty  of  every  collector" 
to  grive  receipts  for  taxes  paid. 


Sec.  14  (a),  Act  of  1916  as  amended. 
Also  Sees.  3220  and  3225,  R.  S. 


Sec.  14  (d),  Act  of  1916  as  amended 
(Sec.  3225,  R.  S.). 

"When  a  second  assessment  is  made  in 
case  of  any  list,  statement,  or  return, 
which  in  the  opinion  of  the  collector  or 
deputy  collector  was  false  or  fraudulent, 
or  contained  any  understatement  or 
undervaluation,  no  tax  collected  under 
such  assessment  shall  be  recovered  by 
any  suit  unless  it  is  proved  that  the  said 
list,  statement,  or  return  was  not  false 
nor  fraudulent  and  did  not  contain  any 
understatement  or  undervaluation;  but 
this  section  shall  not  apply  to  statements 
or  returns  made  or  to  be  made  in  good 
faith  under  the  laws  of  the  United  States 
regarding  annual  depreciation  of  oil  or 
gas  wells  and  mines. 


AD    VALOREM    PENALTIES. 

Failure  to  file  returns  within  prescribed 
time,  25  per  cent  of  tax. 

If  failure  is  due  to  "reasonable  cause," 
none.  See  Com.  Mim.  2200  for  "what 
constitutes  reasonable  cause." 

False  or  fraudulent  returns  willfully 
made,  50  per  cent  of  tax. 

Sec.  2bl.-— Receipts  for  taxes. 

When  requested  by  taxpayers,  collectors 
are  required   to  give  receipts  for  taxes 
Otherwise  same  as  1917  act. 


Sec  252.— Refunds. 
Also  Sees.  3220  and  3225,  R.  S. 

Generally  same  as  1917  act  except  as 
follows: 

New  in  1918  act: 

Provision  for  offsetting  overpayments 
of  tax  in  one  year  against  underpayments 
in  another. 

Five-year  limitation  on  such  adjust- 
ment either  by  credit  or  refund  unless  a 
claim  has  been  filed  by  the  taxpayer  be- 
fore the  expiration  of  the  five  vears. 

Sec.  3225,  R.  S.,  as  amended  by  Sec. 
1316,  Act  of  1918,  reads  as  follows: 

"When  a  second  assessment  is  made  in 
case  of  any  list,  statement,  or  return, 
which  in  the  opinion  of  the  collector  or 
deputy  collector  was  false  or  fraudulent, 
or  contained  any  understatement  or  un- 
dervaluation, such  assessment  shall  not 
be  remitted,  nor  shall  taxes  collected 
under  such  assessment  be  refunded,  or 
paid  back,  or  recovered  by  any  suit, 
unless  it  is  proved  that  such  list,  state- 
ment, or  return  was  not  willfully  false  or 
fraudulent  and  did  not  contain  any  will- 
ful understatement  or  undervaluation." 


BULLETIN  C 


20 


1917. 


Sec.  18,  Act  of  1916  as  amended. 

Penalty  is  not  less  than  $20  nor  more 
than  $1,000  for  refusal  or  neglect  to  pay 
taxes,  make  returns,  or  supply  informa- 
tion required  by  the  act. 

S«c.  14  (c),  Act  of  1916  as  amended. 

Corporations,  joint  stock  companies,  or 
associations,  and  insurance  companies 
that  refute  or  neglect  to  make  returns  as 
required,  or  make  false  or  fraudulent  re- 
turns are  liable  to  a  penalty  of  not, more 
than  $10,000. 

Sec.  18,  Act  of  1916  as  amended. 

Individuals,  and  any  officers  of  any 
corporations,  partnerships,  associations, 
or  insurance  companies  required  by  law 
to  make,  sipn,  or  verify  any  return  or 
supply  any  information,  w^o  make  false 
or  fraudulent  returns  or  statements  with 
intent  to  defeat  or  evade  the  tax  shall  be 
guilty  of  a  mi-odemeanor  and  be  fined  not 
exceeding  $2,000  or  be  imprisoned  for  not 
more  than  one  year,  or  both,  with  the 
costs  of  prosecution . 

Sec.  1004,  Act  of  1917. 

Whoever  fails  to  make  any  return  re- 
quired by  this  act  or  the  regulations, 
makes  any  false  or  fradulent  returns, 
evades  or  attempts  to  evade  the  tax  im- 
posed, or  fails  to  collect  or  pay  over  any 
such  tax,  is  subject  to  a  penalty  of  not 
more  than  $1,000  or  to  imprisonment  for 
not  more'  than  a  year,  or  both,  at  the 
discretion  of  the  court,  and  in  addition 
theretoapenalty  of  double  the  tax  evaded 
oMiOtpftid. 


Sec.  26,  Act  of  1916  as  amended. 


Sec.  27,  Act  of  1916  as  amended. 


Sec.  28,  Act  of  1916  as  amended. 

Returns  were  required  in  cases  of  pay- 
ments of  $800  or  more. 


1918. 

Sbc.  2fA.—Pe7ialtie». 

This  section  prescribes  specific  penal- 
ties. See  Sec.  z50  for  ad  valorem  penal- 
ties. 

Under  the  1918  act  any  individual, 
corporation,  or  partnership  that  fails  to 
pay  or  collect  any  tax,  make  any  returns, 
or  supply  any  information  required  by 
the  act  is  liable  to  a  penalty  of  not  more 
than  $1,000. 

Any  individual,  corporation,  or  part- 
nership, or  any  officer  or  employee  of  any 
corporation  or  member  or  employee  of  a 
partnership,  who  willfully  refuses  to  pay 
or  collect  such  tax,  to  make  such  return, 
or  to  supply  such  information  at  the  time 
or  times  required  under  this  title,  or  who 
willfully  attempts  in  any  manner  to  de- 
feat or  evade  the  tax  imposed  by  this 
title,  shall  be  guilty  of  a  misdemeanor 
and  shall  be  fined  not  more  than  $10,000 
or  imprisoned  for  not  more  than  one  year, 
or  both,  together  with  the  costs  of  prose- 
cution. 


Sec  254. 


-Refums  of  payments  of  divi- 
dends. 


Same  as  1917,  except  that  the  corpora- 
tion need  not  state  in  the  return  the  years 
when  the  amounts  distributed  were 
earned. 

Personal  ser\->ce  corporations  also  are 
subject  to  the  provisions  of  this  section. 

Sec  255. — Returns   of  brokers. 

Same  as  1917  act. 

Sec.  256. — Information   at   source. 

Practically  same  as  1917  act,  except 
that  returns  are  required  in  case  of  pay- 
ments of  $1,000  or  more  and  returns  are 
requirefl  only  to  the  extent  that  the  Com- 
missioner with  the  pproval  f  the  Sec- 
retary may  pre  cribe. 


21 


BULLETIN  C. 


1917. 


Sec.  14  (b),  Act  of  1916  as  amended. 


Sec.  21,  Act  of  1916  as  amended. 


Sec.  9  (f),  Act  of  1916  as  amended. 


Not  covered  in  1917  act. 


Sec.  23,  Act  of  1916  as  amended. 
.  Sec.  5,  Act  of  1917. 

The  war  income  tax  does  not  apply  to 
Porto  Rico  or  the  Philippine  Islands. 


Sec.  200,  Definitibns. 

In  general,  same  as  for  1918. 

"Trade  and  business"  includes  pro- 
fessions and  occupations.  (Not  applic- 
able in  1918.)  Net  income  in  the  case 
of  a  foreign  corporation  or  partnership  or 
a  nonresident  alien  individual  means  the 
net  income  from  sources  within  the 
United  States. 


1918. 

Sec.  257. — Heturns  to  be  public  records. 

Practically  same  as  1917  act,  except  as 
follows: 

Stockholders  of  record  owning  1  per 
rent  or  more  of  the  stock  of  a  corporation 
shall  be  allowed  to  examine  the  corpora- 
tion's return,  V)ut  a  penalty  is  provided  for 
improper  disclosures  of  any  information 
so  obtained. 

The  Commissioner  is  required  to  make 
public  in  such  manner  as  he  shall  de- 
termine list.s  containing  names  and  ad- 
dresses of  all  indi  viduals  making  income- 
tax  returns. 

Sec  258. — Publication  oj statistics. 

Same  as  1917  act. 

Sec.  259 . — Collection  of  foreign  items. 

Same  as  1917  act. 

Sec  260. — Citizens    of     United    States 
possessions. 

Citizens  of  United  States  possessions 
not  residents  of  the  United  States  are  sub- 
ject to  income  tax  only  on  income  de- 
rived from  sources  within  the  United 
States. 

Sec  261. — Porto  Rico  and  Philippine 
Islands. 

In  Porto  Rico  and  the  Philippine 
Islands  the  Act  of  1916  as  amended  is  in 
force,  but  not  the  Act  of  1918.  See  also 
sec.  1400. 

TITLE     III.— WAR-PROFITS     AND 
EXCESS-PROFITS  TAX. 

Part  I. — General  Definitions. 

Sec  300. — General  definitions. 

Taxable  year,  fiscal  year,  personal- 
service  corporation,  paid  or  accrued,  and 
dividends  have  same  meaning  as  in  Sees. 
200  and  201. 


F--; 


.  i'.r/nl  vc.-i'-f  1/.!  irri'm  oYi 


BULLETIN  C. 


22 


1917. 


Sec.  201. 

(Tax  applies  to  corporationB,  partner- 
shipe,  ana  individuals.)  ^ 

Bate  of  tax  (1917  only). 

Rate 
Bracket.         Amount  of  net  income.         per  cent. 

1.  Net  income  in  excess  of  de- 

duction but  not  over  16 
per  cent  of  invested  capi- 
tal         20 

2.  Net  income  between  15  and 

20  per  cent  of  invested 
capital 25 

3.  Net  income  between  20  and 

25  per  cent  of  invested 
capital 35 

4.  Net  income  between  25  and 

33  per  cent  of  invested 
capital 45 

5.  Net  income  in  excess  of  33 

per  cent  of  invested  capi- 
tal          60 

The  total  tax  will  be  the  sum  of  the  tax 
in  the  five  brackets. 

Every  partnership  and  corporation  not 
exempt  snail  be  deemed  to  be  engaged 
in  trade  or  business. 


Sec.  209. 

In  case  of  a  trade  or  business  having 
no  invested  capital  or  only  a  nominal 
capital,  tax  is  8  per  cent  of  net  income  in 
excess  of — 

^  (a)  $3,000  in  case  of  a  domestic  corpora- 
tion: 

[b)  $6,000  in  case  of  a  domestic  partner- 
ship or  a  citizen  or  resident  of  the  United 
States. 

No  deduction  allowed  in  any  other 
cases. 

No  similar  provision. 


No  similar  provision. 


Not  covered  in  the  act.    See  Art.  17, 
Reg.  41. 


No  similar  provision. 


1918. 
Part  II.— Imposition  of  Tax. 

Sec.  301.  Imposition  of  tax, 
(On  corporations  only.) 

(a)  For  1918. 

Rate 
Bracket.         Amount  of  net  income.         percent. 

1.  Net  income  in  excess  of  ex- 

cess-profits credit  and  not 
in  excess  of  20  per  cent 
of  invested  capital 30 

2.  Net  income  in  excess  of  20 

per  cent  of  invested  capi- 
tal          65 

3.  Netincomein  excess  of  war- 

profits  credit 80 


The  total  tax  will  be  the  sum  of  the  tax 
in  brackets  1  and  2  plus  the  amount  by 
which  the  tax  in  bracket  3  exceeds  the 
tax  in  brackets  1  and  2.  The  total  tax 
will  be  the  sum  of  the  tax  in  brackets  1 
and  2  if  such  total  exceeds  the  tax  in 
bracket  3.  The  total  tax  under  this  sec- 
tion is  subject  to  the  provisions  of  Sec. 
302. 

No  similar  provision. 

Personal  service  corporations  not  sub- 
ject to  the  tax.  See  Sec.  303  for  partial 
personal  service  corporation. 


(b)  For  1919  and  subsequent  years  only 
the  first  and  second  brackets  are  used 
and  the  rates  of  tax  are  20  per  cent  and 
40  per  cent,  respectively.  The  total  tax 
is  subject  to  the  provisions  of  Sec.  302. 

(c)  New  in  1918  act. 

Taxability  of  income  in  1919  and  sub- 
sequent years  from  Government  con- 
tracts made  between  April  6,  1917,  and 
November  11, 1918. 

(d)  If  excess-profits  credit  is  not  ex- 
hausted under  first  bracket  of  subdivi- 
sions (a)  or  (6)  the  excess  is  to  be  ap- 
plied to  the  second  bracket. 

(«)  For  the  purpose  of  the  act  of  March 
21,  1918,  placing  transportation  systems 
under  Feaeral  control,  excess  and  war- 
profits  tax  is  deemed  as  levied  by  an  act 
in  amendment  of  Title  II,  Revenue  Act 
of  1917. 


23 


BULLETIN  C. 


1917. 


No  similar  provision. 


Sec.  201. 

All  trades  or  businesses  in  which  a  part- 
nership or  a  corporation  is  engaged  are 
deemed  a  single  trade  or  business  and  all 
income  from  whatever  source  received  is 
treated  as  received  from  such  trade  or 
bufiinees.    See  also  Sec.  209. 


Sec.  201. 

The  tax  applies  to  income  from  all  trades 
or  businesses  except: 

(a)  Compensation  or  fees  received  by 
officers  and  employees  of  the  United 
States,  or  any  State,  Territory,  or  the  Dis- 
trict of  Columbia,  or  any  local  subdivision 
thereof,  for  their  services  as  such. 

(fc)  Corporations  exempt  under  Sec.  11, 
Title  I,  Act  of  September  8,  1916,  as 
amended;  also  partnerships  and  individ- 
uals to  the  extent  that  they  are  carrying 
on  the  same  trade  or  business,  or  come 
■within  the  same  descriptions. 

(c)  Incomes  derived  from  the  business 
of  Ufe,  health,  and  accident  insurance 
combined  in  one  policy  issued  on  the 
weekly  premivun  payment  plan. 

Sec.  202. 

The  tax  shall  not  be  imposed  in  the  case 
of  the  trade  or  business  of  a  foreign  corpo- 
ration or  a  foreign  partnership,  or  a  non- 
resident alien  individual,  the  net  income 
of  which  trade  or  business  during  the 
taxable  year  is  less  than  $3,000. 


1918. 

Sec.  302. — Limitation  of  tax. 

Tax  in  subdivision  (a)  of  Sec.  301,  shall 
not  exceed — 

30  per  cent  of  net  income  between 
13,000  and  $20,000,  plus  80  per  cent 
of  net  income  over  $20,000. 
Tax  in  subdivision  (6)  of  Sec.  301  shall 
not  exceed — 

20  per  cent  of  net  income  between 
$3,000  and  $20,000,  plus  40  per  cent 
of  net  income  over  $20,000. 
Tax  in  (a)  and  (6),  Sec.  301,  when  used 
in  (c),  Sec.  301,  shall  not  exceed  limita- 
tion as  stated. 

For  limitation  in  case  of  return  for  less 
than  12  months,  see  Art.  732  of  Reg.  No. 
U5. 

Sec.  303. — Tax  when  partly  personal- 
service  business. 

If  not  less  than  30  per  cent  of  total  net 
income  is  derived  from  personal  service 
phase  of  business,  the  part  of  net  income 
derived  from  nonpersonal  service  phase 
of  business  is  taxed  separately,  iising  pro- 
portionate parts  of  excess  and  war  profits 
credits. 

The  tax  on  personal  service  income  will 
be  the  same  percentage  of  such  income  as 
the  tax  on  the  non^rsonal  service  income 
is  of  such  income,  but  not  less  than  20  per 
cent  of  the  personal  service  income. 

If  tax  on  entire  net  income  disregarding 
this  section  is  less  than  20  per  cent  of  the 
income,  this  section  will  not  apply. 

Total  tax  imder  this  section  subject  to 
limitation  of  Sec.  302. 

Sec.  304. — Exemptions. 

(a)  Those  listed  in  Sec.  231  to  the  ex- 
tent they  are  exempt  under  Title  II. 

(6)  Those  having  less  than  $3,000  net 
income. 

(c)  Net  income  derived  from  mining 
gold. 


BULLETIN  C. 


24 


W17. 


Not  specifically  provided  in  the  act. 
See  Art.  20,  Reg.  No.  41. 


Sec.  200. 
Sam«, 


No  similar  provision. 


1918. 

Sbc.  305. — ApportionmerU  ofSpedfie 
Exemption. 

If  the  return  is  for  less  than  12  months, 
the  specific  exemption  of  $3,000  must  be 
reduced  to  the  same  proportion  of  $3,000 
that  the  period  coverea  by  the  return 
bears  to  12  months. 

Part  III.— Credits. 

Sec  310. — Prewar  period. 
Means  calendar  years  1911,  1912,  1913, 
or  as  many  of  such  years  during  the  whola 
of  which  the  corporation  was  in  existence. 

Sec  311.— TFor  profits  credit. 


Conditions. 


(a)  In  general. 


S3, 000 


(6)  No  net  in- 
come durine 
prewar  period 
or  if  credit  in 
(a)  is  less  than 
10  per  cent  o( 
invested  capi- 
tal for  tax  year. 

(c)  Not  in  exist- 
ence during  all 
or  at  least  one 
j'ear  of  prewar 
period  except 
as  in  (d). 


(«0  II  corpora- 
tion was  not  in 
existence  dur- 
ing all  of  at 
least  one  pre- 
war ycar_,  and 
(1)  if' majority 
of  its  stock  IS 
owned  or  con- 
trolled by  a 
corporal  ion 
which  had  a 
prewar  exist- 
ence, or  (2)  if 
50  per  cent  or 
more  of  its 
gross  income 
was  derived 
from  a  Govern- 
ment contract 
made  between 
Apr.  e,  1917, 
and  Nov.  11, 
1918. 

(e)  Foreign  cor- 
porations. 


3,000 


3,000 


Credit. 


None. 


Plus  average  net  income 
prewar  period  phu  or 
minus  as  case  may  be, 
10  per  cent  of  the  dif- 
ference between  aver- 
age invested  capital  for 
prewar  period  and  in- 
vested capital  for  tax- 
able year.  Prorate  if 
return  is  for  less  than 
12^  months. 

Plus  10  per  cent  of  in- 
vested capital  Icr  tax* 
able  year. 


Pins  credit  based  on  that 
of  corporations  en- 
gaged in  same  general 
cli^  of  business;  but 
not  less  than  10  per 
cent  of  invested  capi- 
tal for  taxable  year. 

Until  average  percentage 
of  net  income  to  in- 
vested capital  is  de- 
termined, 10  per  cent 
of  invested  capital  far 
taxable  year  should  be 
used. 

Compute  credit  under  (b) 
instead  of  (e). 


See  See.  nr. 


25 


BULLETIN  C. 


1917. 

Sec.  203.  Deduction. 

(a)  Domestic  corporation:  An  amount 
eq  ual  to  the  same  percentage  of  the  invest- 
ed capital  for  the  taxable  year  which  the 
average  net  income  of  the  trade  or  busi- 
ness during  the  prewar  period  was  of  the 
invested  capital  for  the  prewar  period  (not 
less  than  7  nor  more  than  9  per  cent  of 
invested  capital  for  taxable  year) — plus 
$3,000. 

(b)  Domestic  partnership  and  citizen 
or  resident  of  United  States.  Same  as  in 
(a)— plus  $6,000. 

(c)  Foreign  corporation  or  partnership 
or  a  nonresident  alien  individual.  Same 
as  in  (a)— plus  none. 

(d)  If  prewar  average  net  income  can- 
not be  determined,  deduction  shall  be 
computed  under  Sec.  205.  {See  following 
Sec.  204,  below.) 

Sec.  204.  Deduction  (continued). 

If  corporation  or  partnership  was  not  in 
existence  r  individual  not  in  business 
during  all  of  at  least  one  prewar  year: 
8  per  cent  of  invested  capital  for  taxable 
year— plus  $3,000  for  corporation;  $6,000 
for  partnership  or  individual. 

Foreign  corporation  or  partnership  or 
nonresident  alien  individual:  8  per  cent 
of  invested  capital  for  taxable  year — plus 
none. 

Sec.  205  (a).  Deduction  (continued). 

If  taxpayer  had  no  net  income  during 
the  prewar  period,  or  if  during  the  prewar 
period  the  percentage  of  the  taxpayer's 
net  income  to  invested  capital  was  low  as 
compared  with  similar  data  of  representa- 
tive taxpayers  engaged  in  a  like  or  similar 
business,  the  deduction  shall  be: 

(1)  For  domestic  corporation.  An 
amount  equal  to  the  same  percentage  of 
its  invested  capital  for  the  taxable  year 
which  the  average  deduction  (determined 
as  in  Sec.  203  but  excluding  the  $3,000  or 
$6,000  mentioned  therein)  for  such  year 
of  representative  corporations  is  of  their 
average  invested  capital  for  such  year-^ 
plus  $3,000. 

(2)  For  domestic  partnership  or  citizen 
or  resident  of  United  States:  Amount  com- 
puted on  same  principle  as  in  (1) — plus 
$6,000. 

(3)  For  foreign  corporation  or  partner- 
ship or  for  nonresident  alien  individual: 
Amount  computed  on  same  ];rinriple  as 
in  (1) — plus  none. 

Average  percentage  of  net  income  to' 
invested  capital  of  representative  tax- 
payers shall  be  determined  by  the  Com- 
missioner. 

In  case  of  taxpayers  having  fiscal  years, 
the  percentage  determined  by  the  calen- 
dar year  ending  during  such  fiscal  year 
ehall  be  used.  , 


1918. 

Sec.  312. — Excess-profits  credit. 

$3,000  dIus  8  per  cent  of  invested  capital 
for  taxable  year. 

No  specific  exemption  of  $3,000  to  a 
foreign  corporation.    See  Sec.  327. 


Somewhat 
328  (b). 


similar  provision  in  Sec^ 


BUIAETIN  e. 


26 


1917. 

(6)  In  cases  coming  under  this  section 
(205).  the  tax  is  computed  on  the  basis  of 
a  deduction  determined  under  Sec.  203, 
but  the  taxpayer  may  file  a  claim  for 
abatement  of  amount  by  which  tax  so 
aaseased  -  exceeds  tax  if  assessed  under 
this  section  (205). 

Collection  of  tax  covered  by  claim  may 
be  withheld  till  claim  is  decided  but  bond 
may  be  required  of  taxpayer. 

Sec.  210. 

When  investe4  capital  can  not  be  deter- 
mined by  the  Secretary  of  the  Treasury, 
the  deduction  shall  be: 

An  amount  equal  to  the  same  propor- 
tion of  the  net  income  from  the  trade  or 
business  received  during  the  taxable  year 
as  the  proportion  which  the  average  de- 
duction (as  per  Sec.  203  excluding  $3,000 
and  $6,000)  for  the  same  calendar  year  of 
representative  taxpayers  engaged  in  a 
similar  trade  or  business,  bears  to  the  total 
net  income  of  the  trade  or  business  re- 
ceived by  such  taxpayers — plus  $3,000  in 
the  case  of  a  domestic  corporation;  $6,000 
in  the  case  of  a  domestic  partnership  or  a 
citizen  or  resident  of  the  United  States. 

Proportion  between  deduction  and  net 
income  in  each  trade  or  business  to  be 
determined  by  Commissioner.  If  tax- 
payers have  fixed  fiscal  years  the  propor- 
tion determined  for  the  calendar  year 
ending  during  such  fiscal  year  shall  be 
used. 


1918. 


See  Sec.  327  (a). 

Tax  is  determined  on  basis  of  ratio  of 
average  tax  to  average  net  income  of 
representative  taxptayers. 


Somewhat  similar  provision  in   Sec. 
328  (b). 


PART  IT.— Net  Income. 


Sec.  206.  Net  income  of  corpyorations. 
(a)  1911  and  1912.— Same  as  1918. 

(6)  1913.— Same  as  1918. 


(c)  Taxable  year.  Net  income  com- 
puted as  provided  in  Title  I,  Act  of  Sep- 
tember 8.  1916.  as  amended  by  this  act 
(Oct.  3.  1917)  less  dividends  on  stock  of 
other  corporations  subject  to  the  tax. 

Not  specifically  covered  in  the  act. 
Determined  in  same  manner  as  for  1918. 


Sec.  ZTQ.—Net  income. 

(o)  1911:  Net  income  as  computed 
under  act  of  August  5,  1909,  plus  taxes 
im]K>sed  by  that  act  and  paid  during  the 
year. 

1912:  Same  as  1911. 

1913:  Net  income  as  computed  under 
act  of  October  3,  1913,  plus  taxes  imposed 
by  the  act  of  August  5,  1909.  and  paid 
during  the  year,  minus  dividends  on 
stock  or  from  earnings  of  corporations  tax- 
able under  that  act. 

Taxable  year — Net  income  as  computed 
foj  income-tax  purposes. 


(6)  Average  net  income  for  prewar 
period  determined  by  dividing  number  of 
years  of  prewar  existence  into  net  income 
for  such  years,  no  deduction  to  be  made 
for  years  in  which  there  was  a  net  loss. 


27 


BULLETIN  C 


Net  income,  partnerships  and  individ-' 
iials. 

Net  income  for  1911,  1912,  1913,  and 
taxable  year,  computed  as  provided  in 
Title  I,  Act  of  September  8,  1916,  as 
amended  by  this  act  (Oct.  3, 1917),  except 
as  follows: 

(1)  Credit  allowed  by  Sec.  5  (b),  act  of 
September  8,  1916,  as  amended  (divi- 
dends on  stock  of  corporations  subject  to 
the  tax)  shall  be  deducted.  j 

Deductions  allowed  partnerships: 

Taxpayer.  Period.  Deductions. 

Domestic         1911, 1912, 1913,  Same    as    individ- 
partnership.  and  taxable  uals.      See  Sec.  5 

year.  (a),   Act   of  Sep- 

tember 8,  1916,  as 
amended. 
Foreign   part-  Sam*.  Same    as     individ- 

nership.  uals.    See   Sec.   6 

(a),  Act  of  Sep- 
tember 8,  1916,  as 
amended.  ' 


191S. 


No  similar  provision;  partnerships  and 
individuals  not  subject  to  the  tax. 


Not  specifically  defined  in  the  act. 
See  Art.  47  of  Reg.  No.  41. 


Not  specifically  defined  in  the  act. 
Su  Art.  47  of  Reg.  No.  41. 


Not  specifically  defined  in  the  act. 
See  Art.  44,  R^.  41,  par.  100. 

Sec.  207,  Par.  2. 

As  used  in  this  title  (II),  invested  capi- 
tal does  hot  include  stocks,  bonds  (other 
than  obligations  of  the  United  States)  or 
other  assets,  the  income  from  which  is  not 
subject  to  tile  tax  imposed  by  this  title. 


No  similar  provision;  partnerships  not 
subject  to  the  tax. 


Part  y.— Invested  Capital. 

Sec.  325. — Terms  relating  to  Invested 
Capital. 

(a)  Definitions: 

Intangible  property- 
Patents. 

Copyrights. 

Secret  processes  and  formulae. 

Good  will. 

Trade-marks. 

Trade  Brands. 

Franchises. 

Other  like  property. 
Tangible  property — 

Stocks, 

Bonds. 

Notes. 

Other  evidences  of  indebtedness. 

Bills  and  accounts  receivable. 

Leaseholds. 

Property  other  than  intangibles. 
Borrowed  Capital — 

Money  or  other  property   bor- 
rowed. 
Inadmissible  assets — 

Stocks,  bonds,  and  other  obliga- 
tions (except  obligations  of  the 
United  States)  the  dividends 
or  interest  from  which  are  not 
included  in  net  income  except 
where  income  from  such  assets 
consists  in  part  of  gains  or 
profits  from  the  sale  or  other 
disposition  thereof,  or  interest 
from  such  assets  is  in  effect  in- 
cluded in  net  income  by  reason 
of  Sec.  234  (a)  2,  a  correspond- 
ing part  of  the  capital  invested 
in  such  assets  shall  not  be 
deemed  inadmissible. 


BCLUBTIN  C 


28 


1917. 

Not  specifically  defined  in  the  act.    See 
Par.  129,  Art.  53,  Reg.  No.  41. 


Not  specifically  defined  in  the  act. 


INVESTED  CAPITAL. 

Sec.  207  (a).  In  the  case  of  a  corpoia- 
tion  or  a  partnership  means — 

(1)  Actual  cash  paid  in. 

(2)  Actual  cash  value  of  tangible 
property  paid  in  other  than  cash  for 
stock  or  snares  at  the  time  of  such  pay- 
ment (but  if  paid  in  prior  to  Jan.  1,  1914, 
the  actual  cash  value  of  the  tangible 
property  as  at  Jan.  1,  1914,  but  in  no 
case  to  exceed  the  par  value  of  the  original 
stock  or  diares  specifically  issued  there- 
for.) 


Actual  cash  value  of  p>atenta  and  copy- 
rights paid  in  for  stock  or  shares  at  the 
time  oi  such  payment  may  be  included 
in  invested  capital,  but  not  in  an  amount 
exceeding  the  par  value  of  the  stock 
■pecifically  issu^  therefor. 

Actual  cash  value  of  good  will,  trade- 
marks, trade  brands,  and  like  intangible 
property  acquired  for  cash  or  tangible 
property  at  time  acquired  but  not  in  ex- 
cess of  actual  cash  paid  for  same  or  cash 
value  of  tangible  property  specifically 
paid  for  same. 

(3)  Same  as  1918,  except  the  term 
"used  or  employed  in  the  business," 
modifies  surplus  and  imdivided  profits. 

Good  will,  trade-marks,  trade  brands, 
and  like  intangible  property  acquired 
bona  fide  prior  to  Marcn  3,  1917,  for  stock 
or  shares  in  a  corporation  or  interest  or 
aharee  in  a  partnership  may  be  included 
in  invested  capital  at  a  value  not  ex- 
ceeding— 

(a)  Actual  cash  value  of  intangibles 

at  time  paid  in. 
(6)  Par  value  of  stock  specifically 

issued  for  same, 
(c)  Twenty  per  cent  of  the  total 
interest  or  shares  in  the  part- 
nerBhip  or  20  per  cent  of  the 
total  par  value  of  the  stock  out* 
standing  as  at  March  8, 1917. 


1918. 

Admissible  Assets — 

All  assets  other   than  inadmis- 
sibles   valued    in   accordance 
I  with  Sees.  326,  330,  and  331. 

:  (6)  Par  value  in  case  of  stock  or  shares 
IflBued  at  a  nominal  value  or  having  no 
par  value  is  the  fair  market  value  of  such 
stock  or  shares  as  at  the  date  of  issue. 

Sec.  226.— Invested  capital. 

(a)  Invested  capital  means — 

(1)  Actual  cash  bona  fide  paid  in  for 
stock  or  shares. 

(2)  Actual  cash  value  of  tangible  prop- 
erty other  than  cash,  bona  fide  paid  m  for 
stock  or  shares  at  the  time  of  such  pay- 
ment, but  not  in  excess  of  par  value  of 
stock  or  shares  specifically  issued  therefor 
unless  cash  value  of  property  when  paid 
in  can  be  proved  greater  than  par  value 
of  stock  or  shares  issued  therefor,  in 
which  case  excess  may  be  treated  as  paid 
in  surplus. 

Commissioner  shall  keep  a  record  of 
cases  coming  within  the  above  exception 
and  upon  request  furnish  a  copy  to  Con- 
gress notwithstanding  Sec.  257. 

Patents  and  copyrights  are  classed  is 
intangibles  in  Revenue  Act  of  1918  and 
subject  to  25  per  cent  limitation  if 
acquired  for  stock  or  shares. 


Not  specifically  covered  in  1918  act. 


^  (8)  Paid  in  or  earned  surplus  and  un- 
divided profits,  but  not  including  surplus 
and  undivided  profits  earned  during  the 
taxable  year. 

(4)  Intangible  propertjr  bona  fide  paid 
in  for  stock  or  snares  prior  to  Marcn  3, 
1917,  but  not  exceeding — 


(a)  Actual  cash  value  of  property 

when  paid  in. 

(b)  Par  value  of  stock  issued  therefor. 

(c)  In  the  aggregate  25  per  cent  of  par 

value  01  total  outstanding  stock 
or  shares  of  the  corporation 
March  3, 1917. 


29 


BULLETIN  C. 


1917. 

Not  specifically  covered  in  1917  Act. 
JSee  Tax  Reviewers'  Minutes  No.  34. 


"  Invested  capital "  as  used  in  this  title 
^oes  not  include  money  or  other  property 
borrowed . 

"Invested  capital "  as  used  in  this  title 
{II)  does  not  include  stocks,  bonds  (other 
than  obligations  of  the  Ignited  States)  or 
■other  assets,  the  income  from  which  is  not 
flubject  to  the  tax  imposed  by  this  title 
(II).  See  also  Art.  53,  para.  129  of  Reg. 
No.  41. 

Same  as  1918,  except  that  "averaged 
monthlv"  is  added. 


Not  specifically  defined  in  the  act. 


Sec.  207  (b). 

INVESTED   CAPITAL,   INDIVIDUALS. 

(1)  Actual  cash  paid  into  the  trade  or 
business. 

(2)  Actual  cash  value  of  tangible  prop- 
erty paid  into  the  trade  or  business  at  the 
time  of  such  payment  but  if  paid  in  prior 
to  January  1,  1914,  only  cash  value  of 
property  as  at  that  date  may  be  included. 

(3)  Actual  cash  value  of  patents,  copy- 
rights, good  will,  trade-marks,  trade 
brands,  franchises  or  other  intangible 
property  paid  into  the  ti*ade  or  business, 
at  the  time  of  such  payment,  if  payment 
was  made  therefor  specifically  in  cash  or 
tangible  property,  but  not  to  exceed  the 
actual  cash  paid  or  the  actual  cash  value 
at  the  time  paid  of  the  tangible  property 
specifically  paid  for  the  intangibles. 

In  case  of  foreign  corporations  and-' 
partnerships  and  nonresident  alien  indi- 
viduals the  invested  capital  means  that 
proportion  of  the  entire  invested  capital 
as  defined  in  this  title  which  the  net  in- 
come from  sources  within  the  United 
States  bears  to  the  entire  net  income. 


1918. 

(5)  Intangible  property  bona  fide  paid 
in  for  stock  or  shares  on  or  after  March  3, 
1917,  but  not  exceeding: 
(rt)  Same  as  in  (4). 

(b)  Same  as  in  (4). 

(c)  In  the  aggregate  25  per  cent  of  par 

value  of  capital  stock  of  cor- 
poration outstanding  at  begin- 
ning of  taxable  year. 

(b)  "  Invested  capital "  does  not  include 
"borrowed  capital." 

(c)  Invested  capital  as  defined  above 
must  be  reduced  by  a  percentage  thereof 
equal  to  the  percentage  which  the  amount 
of  inadmissible  assets  is  of  the  amount  of 
admissible  and  inadmissible  assets  held 
during  the  year. 

(d)  Invested  capital  for  any  period 
means  the  average  invested  capital.  In 
a  return  for  a  fractional  part  of  a  year,  in- 
vested capital  (except  for  purpose  of  Sec. 
311  (a)  2),  shall  be  the  same  fractional 
part  of  such  average  invested  capital. 

A-verage   invested    capital    for    prewar 

Eeriod  is  determined  by  dividing  the  num- 
er  of  years  within  that  period  into  the 
sum  of  the  average  invested  capital  for 
such  years. 


Not  covered  in  1918  act. 
>  not  subject  to  the  tax. 


Individupls 


See  Sees,  327,  328, 


Sec.  327. — Special  cases. 

War-protits  and  excess-profits  tax  shall 
be  computed  under  Sec.  328  in  the  fol- 
lowing cases: 


BULLETIN  C. 


30 


1917. 

\Mien  invested  capital  can  not  be  de- 
termined bv  the  Secretarj'.  (See  Sec. 
210,  under  "Deduction.") 

Foreign  corporations  were  taxed  on 
their  ret  income  from  sources  within  the 
United  States  at  the  rates  prescribed 
for  domestic  corf)oration8  but  invested 
capital  for  the  purpose  of  computing  the 
deduction  was  detenuined  as  provided  in 
Sec.  207  (b). 

No  similar  provision  in  1917  act.  Com- 
pare with  Art.  59,  Reg.  41.  Under  the 
1917  act,  cases  cf  this  kind  were  adjusted 
under  Sec.  210  only  when  the  Secretary 
of  the  Treasury  was  unable  to  determine 
eatisfactorily  the  respective  values  of  the 
several  elates  of  property  at  the  time  of 
pa>-ment. 


No  similar  provision. 


No  similar  provision. 


1918. 

(a)  When  invested  capital  (Sec.  326) 
can  not  be  determined  by  the  Commis- 
sioner. 

(6)  In  the  case  of  foreign  corporations. 


(c)  Where  a  mixed  aggr^ate  of  tan^- 
ble  and  intangible  property  was  paid  m 
for  stock  or  for  stock  and  bonds  and 
respective  values  as  at  time  of  payment, 
or  classes  of  property  paid  in  for  the  stocks 
or  bonds  can  not  be  determined. 

(d)  Where  the  Commissioner  declares 
of  record  that  the  tax  if  determined 
without  the  benefit  of  this  section  woiild 
owing  to  abnormal  conditions  affecting 
capital  or  income  work  exceptional  hard- 
ship on  a  corpfjration. 

This  subdivision  (</)  will  not  apply  to 
any  case— 

(1)  In  which  tax  is  high  merely  because 
a  high  rate  of  income  was  earned  during 
the  taxable  year  on  a  normal  invested 
capital. 

(2)  In  which  50  per  cent  or  more  of 
the  gross  income  (computed  imder  Sec. 
233)  consL'sts  of  gains,  etc.,  derived  on  a 
cost-plus  basis  from  Government  con- 
tracts made  between  April  6,  1917,  and 
November  11,  1918. 


Under  Sec.  210  the  adjustment  is  made 
on  the  basis  of  similar  deductions  instead 
of  ratio  between  net  income  and  tax. 


See  Sec.  210,  p$ur.  2. 


No  similar  provision. 


No  similar  provision. 


Sec.  328. — Computation  of  tax  in  special 
cases. 

(a)  Tax  in  cases  under  Sec.  327  shall 
be  the  amount  which  bears  the  same 
ratio  to  the  net  income  of  the  taxpayer 
(in  excess  of  $3,000)  for  the  taxable  year 
as  the  average  tax  of  representative  cor- 
porations engaged  in  a  like  or  similar 
trade  or  business  bears  to  their  average 
net  income  (in  excess  of  $3,000).  In 
case  of  foreign  corporations  tax  will  be 
computed  disregarding  the  exemption  of 
$3,000. 

"Representative  corporations  '  will  in- 
clude only  those  whose  invested  capital 
under  Sec.  320  can  be  determined  and 
are  similarly  circumstanced  to  the  tax- 
payer. 

ib)  Computation  of  first  installment  of 
tax  under  Sec.  327.  Tax  shall  be  cm 
basis  of  50  per  cent  of  net  income  pend- 
ing final  adjustment. 

Cf)  Commissioner  shall  keep  record  of 
cases  coming  under  this  section  and  upon 
request  furnish  list  to  Congress  not- 
withstanding Sec.  257. 


31 


BULLETIN  C. 


1917. 


Sec.  204,  par.  2. 

Same  as   1918,    except  that  date  is 
January  2,  1913. 


No  similar  provision. 


No  similar  provision. 


No  similar  provision. 


Sec.  208. 

Same  as  1918  act,  estept  that  1918  act 
adds  "change  in  ownership  of  property" 
to  the  conditions  under  wMch  the  respec- 
tive sections  apply. 


1918. 
Part  VI. — Reorganizations. 

Sec  330. — Reorganizations. 

Reorganization,  consolidation,  or  change 
of  ownership  after  January  1,  1911.  Pre- 
war history  of  successor  taxpayer  shall  be 
deemed  to  be  that  of  the  predecessor 
taxpayer. 

A  tra-^'e  or  business  in  which  capital  is 
a  material  income  producing  factor,  which 
was  previouslv  owned  by  a  partnership 
or  an  individual,  and  is  incorporated 
prior  to  July  1,  1919,  may  elect  to  have 
its  net  income  from  January  1,  1918,  to 
date  of  incorporation  taxed  as  that  of  a 
corporation. 

raragraph  3  of  this  section  is  not  ap- 
plicable in  any  case  where  net  income  for 
1918  was  less  than  20  per  cent  of  invested 
capital  for  1918. 

Adjustment  of  values  of  assets  in  exist- 
ence during  both  prewar  period  and  tax- 
able year. 


Sec  331. 


Valuation     of 
reorganization. 


assets     upon 


Reorganization,  etc.,  or  change  in  own- 
ership of  property  after  March  3,  1917. 
If  interest  or  control  in  trade  or  business 
or  property  of  50  per  cent  or  more  remains 
in  the  same  persons  or  any  of  them,  no 
asset  transferred  may  be  valued  for  in- 
vested capital  purposes  at  value  greater 
than  would  have  been  allowed  previous 
owner. 


Part  VII. — Miscellaneous. 


Sec  200.  Tax    on    fiscal- vear   returns     Sec  335 
ended  in  1917. 

The  same  fractional  part  of  the  tax 
computed  under  the  Revenue  Act  of  1917 
for  the  entire  period  as  the  time  from 
January  1,  1917,  to  the  end  of  the  fiscal 
year,  is  of  the  full  fiscal  year. 


Fiscal   years   ending   in   1918 
or  1919. 
(a)  Fiscal  year  ending  in  1918. 

(1)  Compute  tax  for  entire  period  ac- 
cording to  Revenue  Act  of  1917  and  take 
same  fractional  part  of  tax  as  number  of 
months  of  period  falling  in  1917  is  of  the 
whole  period. 

(2)  Compute  tax  for  entire  period  ac- 
cording to  Revenue  Act  of  1918  and  take 
same  fractional  part  of  tax  as  number  of 
months  of  period  falling  within  1918  is  of 
the  whole  period . 

(3)  The  tax  will  be  the  sum  of  (1)  and 
(2)  less  any  tax  already  paid  for  same 
period  under  Revenue  Act  of  1917. 

(6)  Fiscal  year  ended  in  1919. 

(1)  Compute  tax  for  entire  period  under 
Sec.  301  (a)  and  take  same  fractional  part 
of  tax  as  number  of  months  of  period  fall- 
ing within  1918  is  of  whole  period. 

(2)  Compute  tax  for  entire  period  under 
Sec.  301  (b)  or  (c),  as  the  case  may  be^ 


BULLETIN  C 


32 


1917. 


See  Arts.  10,  11,  12,  and  13  of  Reg. 
Uo.  41. 


No  similar  provision. 


1918. 

and  take  same  fractional  part  of  tax  as 
number  of  months  of  period  falling  within 
1919  is  of  entire  period. 

(3)  The  tax  will  be  the  sum  of  (1) 
and  (2). 

(c)  Fiscal  year  of  partnership  or  per- 
sonal service  corporation  endea  in  1918. 

Tax  will  be  same  fractional  part  of  tax 
for  entire  period  computed  under  Reve- 
nue Act  of  1917  as  the  number  of  months 
of  the  period  falling  within  1917  is  of  the 
entire  period.  Any  excess  paid  to  be 
refunded. 

Sec.  336.— Returns. 

All  corporations  except  those  exempt 
under  Sec.  304  must  make  returns.  Re- 
turns to  be  made  and  taxes  paid  as  pro- 
vided for  purposes  of  Title  II.  See  also 
Form  1120,  page  2,  of  Instructions,  para. 
2  and  3. 

Sec.  337. — Sale  of  mineral  deposits. 

Tax  in  case  of  bona  fide  sale  of  mines, 
oil  or  gas  wells,  or  any  interest  therein 
where  principal  value  has  been  demon- 
strated by  prospecting  or  exploration  or 
discovery  work  done  by  the  taxpayer 
shall  not  exceed  20  per  cent  of  the  selling 
price  of  such  property  or  interest. 


Sec.  211. 

Income  return  required  of  every — 

(a)  Foreign  partnership  with  net  in- 
<x)me  of  $3,000  or  more. 

(b)  Domestic  partnership  with  net  in- 
come of  $6,000  or  more. 

Return  to  be  rendered  in  same  manner 
and  same  time  as  prescribed  under  Title 
I,  actof  September  8, 1916,  as  amended. 


Partnerships  not  subject  to  the  tax. 
No  excess  or  war  profits  return  required. 
For  income  return,  see  Sec  224. 


Sec.  212. 

Administrative,  special,  and  general 
provisions  of  law  relating  to  internal  reve- 
nue taxation  not  heretofore  repealed  and 
not  incon-sistent  with  provisions  of  this 
title,  and  all  provisions  of  Title  I.  Reve- 
nue Act  of  1916  as  amended  relating  to 
returns  and  payment  of  tax  are  made 
applicable  to  tax  imposed  by  this  title. 


Covered  in  Sec.  1305. 


Sec.  213. 

Commissioner  may  make  necessary 
regulations  and  require  taxpayers  to  fur- 
nish information  necessary  to  collect  the 
tax. 


Covered  in  Sec.  1305. 


33 


BULLBTIN  C. 


1917. 

Sec.  214.  Excess-profits  tax  law,  Act 
of  March  3,  1917,  repealed. 

Provision  made  for  credit  of  taxes  paid 
under  said  act  against  tax  due  under  this 
title. 


1918. 


No  similar  provision. 


Not  covered  in  1917  act. 


Sec.  22,  act  of  1916  as  amended. 

Sec.  1001,  act  of  1917. 

Sec.  16,  act  of  1916  as  amended. 


Sec.  1005,  act  of  1917. 
Sec.  1008,  act  of  1917. 
Sec.  1010,  act  of  1917. 
Sec.  20,  act  of  1916  as  amended. 

Not  covered  in  1917  a6t. 

Sec.  24,  act  of  1916  as  amended. 
Sec.  1300,  act  of  1917. 


TITLE    XIII.— GENERAL     ADMIN- 
ISTRATIVE PROVISIONS. 

Sec.  1301. — Advisory  Tax  Board. 

Creation  of  Advisory  Tax  Board  and 
procedure  in  submitting  questions  to  the 
board.    New  in  1918  act. 

Sec.  1305. — Extension  of  existing  statutes. 

Par.l.  Same  as  1917  act. 
Pars.  2  and  3.     Practically  same  as  1917 
act. 

Sec  1309. — Authority  for  regulations. 

Same  as  1917  act. 

Sec.  1313. — Fractional  part  of  cent. 

Same  as  1917  act. 

Sec.  1314. — Medium  of  payment  of  tax. 

Same  as  1917  act. 

Sec.  1318. — Jurisdiction  of  district  court. 

Practically  same  as  1917  act. 

Sec.  1320. — Deposit  of  United  States  bonds 
as  security. 

New  in  1918  act. 

TITLE     XIV.— GENERAL     PROVI- 
SIONS. 

Sec.  1400. — Repeal  of  former  acts. 
Newin  1918  act. 

Sec  1402. —  Validating  provisions. 

Same  as  1917  act. 

Sec  1405. — Citation  of  act. 

New  in  1918  act.   ' 

Sec  1408. — Inspection  of  Government  con- 
tracts. 


New  in  1918  act. 


INDEX  BY  SECTIONS. 

ACT  OF  1916,  AS  AMENDED. 
Title  I.   Income  Tax. 

PART  I.    ON   INDIVIDUALS. 

Sec.  Page. 

1  Normal  tax;  additional  tax 7,  8, 12 

2  Income  defined 6,  8,  9, 13 

3  Additional  tax  includes  undistributed  profits 13 

4  Income  exempt  from  law 6, 9 

5  (a)  Deductions  allowed 6,  9, 10, 11, 12 

(6)  Credits  allowed 8, 12,  27 

6  Nonresident  aliens 10, 11, 12, 16 

7  Personal  exemption 12 

8  Returns 8, 12, 13, 14 

9  Assessment  and  administration 13, 18, 19,  21 

PART   n.     ON    CORPORATIONS. 

10  Income  tax  on  corporations 6,  7, 14, 15 

11  Conditional  and  other  exemptions 15 

12  Deductions 15, 16 

13  Returns 8, 14, 17 

14  Assessment  and  administration 18, 19,  20,  21 

PART    III.     GENERAL   ADMINISTRATIVE    PROVISIONS. 

15  Definitions 5 

16  Amending  sections  3167,  R.  S.,  3172,  R.  S.,  3173,  R.  S.,  3176,  R.  S...  18, 19,33 

17  Receipt  for  payment  of  taxes 19 

18  Penalties 20 

19  Verification  of  returns 14 

20  Jurisdiction  of  United  States  District  Court 33 

21  Publication  of  statistics 21 

22  Extension  of  existing  statutes 33 

23  Porto  Rico  and  Philippine  Islands 21 

24  Repeal  of  former  act .33 

25  Income  assessed  under  act  of  1913  (not  compared). 

26  Returns  of  payments  of  dividends 20 

27  Returns  of  brokers 20 

28  Information  at  the  source 20 

29  Credit  for  excess-profits  tax 15, 16 

30  Income  of  foreign  Governments 9 

31  Dividends 5.  fi,  8 

32  Premiums  on  life  insurance  policies 12. 16 

ACT  OF  1917. 
Title  I.   War  Income  Tax. 

1  Normal  war  income  tax 7 

2  "War  surtax 8 

3  Income  exempt  from  the  tax 12, 14 

4  War  Tax  on  Corporations 5, 14, 15, 16 

5  Porto  Rico  and  Philippine  Islands 21 

(35) 


36 

TnxB  II.  War  Excess  Profits  Tax. 
Sec.  Page. 

200  Definitions 5.  21,  24, 31 

201  Rate  of  tax  and  incomes  subject  to  tax 8,  22,  23 

202  Foreign  corporation,  partnership  or  nonresident  alien  individual,  net 

income  less  than  $3,000 23 

203  Deduction 25,26 

204  Deduction  (continued) • 25,  31 

205  Do 2S 

20«  Net  income 16, 26 

207  Invested  capital 27.  28,  29, 30 

208  Reorganizations 31 

209  Tax  on  trade  or  business  having  no  invested  or  only  a  nominal  capital. . .  5,  22 

210  WTien  invested  capital  can  not  be  satisfactorily  determined 26, 30 

211  Partnership  returns 32 

212  Extension  of  existing  statutes 32 

213  Authority  for  r^ulations 32 

214  Repeal  Excess-Profits  Tax  Act  of  March  3,  1917 33 

Title  X.  Administrative  Provisions. 

1001  Extension  of  existing  statutes 33 

1003  Collection  of  tax  (not  compared). 

1004  Penalties 20^ 

1005  Authority  for  regulations 33 

1008  Fractional  part  of  cent 33 

1009  Advance  payments.  . 18 

1010  Medium  of  payment  of  tax 33 

General  Provisions. 

1212  Release  of  tax  withheld  agai  nst  citizen  or  resident  (not  compared). 

1300  Validating  provisions • ••       SS- 


INDEX  BY  SUBJECTS. 


Act,  citation  of 33 

Admissible  assets 28 

Advisbry  tax  board 33 

Aliens,  nonresident: 

Allowable  deductions  and  credits 12 

Deductions  allowed  from  gross  income 11 

Gross  income 9 

Normal  tax 7 

Aliens,  resident 7 

Amortization,  deductions  allowed  from  gross  income 11 

Assets: 

Admissible 28 

Inadmissible 27 

Valuation  of,  upon  reorganization 31 

Bad  debts,  deductions  allowed  from  gross  income 10 

Basis  for  determining  gain  or  loss 6 

Borrowed  capital 27 

Brokers,  returns  of , 20 

Business  expenses,  deductions  for 9 

Capital: 

Borrowed 27 

Invested — 

Corporation  or  partnership 28 

Individuals 29 

Terms  relating  to 27 

Cent,  fractional  part  of 33 

Charitable  contributions,  deductions  allowed  from  gross  income 11 

Citation  of  act 33 

Citizens,  or  residents  of  United  States,  deduction  (excess  profits  tax) 25 

Normal  tax 7 

Of  United  States  possessions 21 

Pre-war  period 25 

Computation  of  tax  in  special  cases 30 

Conditional  and  other  exemptions,  corporations 15 

Consolidated  returns 17 

Contracts,  Government,  inspection  of 33 

Corporations: 

Consolidated  returns 17 

Credits  allowed 16 

Credit  for  taxes 17 

Deductions 15 

Domestic  (excess-profits  tax) 25 

Foreign,  or  partnership  (excess-profits  tax) 25 

Exemptions,  conditional  and  other 15 

Income : 15 

Gross 15 

Net 15 

Items  not  deductible 16 

Payment  of  tax  at  source 17 

Place  for  filing  retui'n 17 

Profits  of,  taxable  to  stockholders 13 

Returns 17 

Tax  on 14 

Time  and  place  for  filing  return 17 

Court,  jurisdiction  of  district. 33 

(37) 


38 

Credits  allowed:                      *                                                                               '  Pwte- 

Corporations .' 1 « 

Corporations,  for  taxes 17 

Excess  profits 25 

Individuals 12 

Individuals,  for  taxes 14 

Nonresident  aliens 12 

Pre-war 24 

\^'ar  profits 24 

Deduftions  allowed : 

Corporations 15 

Individuals 9 

Nonresident  aliens 12 

Deductions  from  gross  income 9 

Amortization 11 

Bad  debts 10 

Business  expenses 9 

Charitable  contributions ! 11 

Depletion 11 

Depreciation 10 

Interest 10 

Ix)sses 10 

Loss  in  inventory 11 

Nonresident  aliens 11 

Obsolescence 11 

Taxes 10 

Deduction  (excess-profits  tax): 

(^itizens  or  residents  of  United  States -25 

Domestic  corporations 26 

Domestic  partnership 26 

Foreign  corporations  or  partnerships,  or  nonresident  alien  individuals. ....  25 

Prewar  period 25 

Definitions,  general 5 

Excess  profits  and  war  profits 21 

Terms  relating  to  invested  capital 27 

Depletion,  deduction  allowed  from  gross  income 11 

Deposits,  mineral,  sale  of 32 

Deposits  of  United  States  bonds  as  security 3S 

Depreciation,  deduction  allowed  from  gross  income 10 

Dividends 5 

Returns  of  payment*  of. 20 

Domestic  corporations,  deduction  (excess-profits  tax) 25 

Estates  and  trusts I'i 

Excess  profits  and  war  profits  tax 21 

Apportionment  of  specific  exemption i.'jiji ;.*,...-..; 24 

Exemptions ."T.-. 23 

General  definitions 21 

Imposition  of  tax 22 

Limitation  of  tax 23 

When  partly  personal  service  business 23 

Excess  profits  creait 25 

Exclusions,  gross  income 9 

Exemptions,  conditional  and  other 15 

Extension  of  existing  statutes 33 

Fiduciary  returns 14 

Fiscal  years  ending  in  1918  or  1919  (war  profits  and  excess  profit*) 31 

Fiscal  years  with  different  rates 7 

Foreign  corporations  or  partnerships,  deduction  (excess  profits) 25 

Foreign  items,  collection  of 21 

Fractional  part  of  cent 33 

Gain  or  loss,  basis  for  determining * 6 

General  administrative  provisions 33 

General  definitions 5 

War  profits  and  excess  profits  tax 21 

Government  contracts,  inspection  of 33 


39 

Gross  income,  defined:  "Pagfi- 

Corporations 15 

Individuals 9 

Imposition  of  war  profits  and  excess  profits  tax 22 

Inadmissible  assets 27 

Income,  parts  of,  subject  to  rates  for  different  years 7 

Income,  gross,  defined: 

Corporations 15 

Exclusions 9 

Inclusions 9 

Individuals 9 

Nonresident  aliens 9 

Income,  net: 

Corporations 15 

Defined 8 

How  computed 8 

War  profits  and  excess  profits 26 

Income  tax: 

Administrative  provisions 18 

Corporations 14 

General  provisions 5 

Individuals : 7 

Individual  returns 14 

^Individuals: 

Invested  capital 29 

Nonresident  alien  deduction  (excess  profits  tax) 25 

Normal  tax 7 

Information  at  source 20 

Inspection  of  Government  contracts 33 

Intangible  property 27 

Interest,  deduction  allowed  from  gross  income 10 

Inventories 6 

Invested  capital  (corporation  or  partnership) 28 

Individuals 29 

Terms  relating  to 27 

Items,  not  deductible: 

Corporations 16 

Individuals 12 

Jurisdiction  of  district  court  (United  States) 33 

Limitation  of  war  profits  and  excess  profits  tax 23 

Loss  in  inventory,  deduction  allowed  from  gross  income 11 

Losses,  deductions  allowed  from  gross  income 10 

Losses,  net 6 

Medium  of  payment  of  tax 33 

Mineral  deposits,  sale  of 32 

Miscellaneous 31 

Net  income: 

Corporations 15 

Defined 8 

Individuals 8 

How  computed 8 

War  profits  and  excess  profits 26 

Net  losses 6 

Nonresident  aliens: 

Allowance  of  deductions  and  credits 12 

Deductions  allowed  from  gross  income 11 

Deduction  (excess  profits  tax) 25 

Gross  income 9 

Normal  tax 7 

Normal  tax: 

Citizens ! 7 

Corporations 14 

Individuals , 7 

Nonresident  aliens 7 

Resident  aliens 7 

Obsolescence,  deduction  allowed  from  gross  income 11 

Partnership,  returns 14 

Partnerships,  domestic,  deductions 25 


40 

Partnerships  and  personal  service  corporations 12 

Partnerships  or  corporations,  foreign,  deduction  (exceas-profita  tax ) 25 

Parts  of  income  subject  to  rates  for  different  years 7 

Payment  of  tax " 18 

'  Medium  of 33 

Payment  of  tax  at  source 13. 17 

Penalties 20 

Ad  valorem 19 

Personal  service  business,  war  profits  and  excess  profits  tax  ou . . . . .-. 23 

Personal  serAace  corporations  and  partnerships 12 

Philippine  and  Porto  Rico,  Islands 21 

Place  and  time  for  filing  returns: 

Corporations 17 

Individuals 14 

Porto  Rico  and  Philippine  Islands 21 

Possessions,  United  States,  citizens  of 21 

Prewar  period : 

Credits 24 

Deduction ; 25 

Prewar  period,  deduction,  citizen  or  resident,  United  Suites 25 

Profits  of  corporation  taxable  to  stockholders 13 

Property: 

Intangible 27 

Tangible 27 

Publication  of  statistics 21 

Receipts,  for  taxes 19 

Refunds "   19 

Regulations,  authority  for 33 

Heorganizations 31 

Valuation  of  assets  upon 31 

llei>eal  of  former  acts 33 

Hesident  aliens,  normal  tax 7 

Resident  or  citizen  of  United  States,  deduction 25 

He  turns: 

Consolidated 17 

Corporation 17 

Fiduciary 14 

Indi\'iduals 14 

Partnership 14 

Time  and  place  for  filing 14, 17 

Understatement  in 14 

War  profits  and  excess  profits 32 

"Returns  of  brokers ' 20 

Beturns  of  payment  of  dividends 20 

Returns  to  be  public  records 21 

Sale  of  mineral  deposits 32 

Security,  deposit  of  United  States  bonds  as 33 

Source: 

I  nformation  at 20 

Payment  of  tax  at — 

Corporations 17 

Individuals 13 

Special  cases 29 

Computation  of  tax  in 30 

Statistics,  publication  of 21 

Stockholders,  profits  of  corporations  taxable  to 13 

Surtax 8 

Tangible  property 27 

Tax: 

Computation  of,  in  special  cases 30 

Limitation  of  war  profits  and  excess  im>fit8 23 

Medium  of  payment  of ; 33 

Normal,  individuals 7 

On  corporations 14 

Payment  of 18 

Payment  of,  at  source 13, 17 

War  profits  and  excess  profits 21 

.  War  profits  and  excess  profits,  when  partly  personal  service  business 23 


41 

Page. 

Tax  board,  advisory 35 

Taxes: 

Credits  for — 

Corporations 17 

Indi\adual8 14 

Deduction  allowed  from  gross  income 10 

Receipts  for 19 

Terms  relating  to  invested  capital 27 

Time  and  place  for  filing  returns: 

Corporations 17 

Individuals 14 

Trusts  and  estates 13 

Understatement  in  returns 14 

United  States  bonds,  deposit  of,  as  security 33^ 

United  States  possessions,  citizens  of 21 

Valuation  of  assets,  upon  reorganization 31 

Validating  provisions 33 

War  profits  and  excess  profits  tax 21 

Applies  to  corporations  only  (1918) 22 

Apportionment  of  specific  exemption 24 

Exemptions 2S 

General  definitions 21 

Imposition  of  tax 22 

Limitation  of  tax 23 

When  partly  personal  service  business 23 

War  profits  credit 24 

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